Strategy-Proofness and Efficiency with Nonquasi-Linear Preferences: A Characterization of Minimum Price Walrasian Rule

47 Pages Posted: 14 Aug 2012

See all articles by Shuhei Morimoto

Shuhei Morimoto

Osaka University - Institute of Social and Economic Research (ISER)

Shigehiro Serizawa

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: August 10, 2012

Abstract

We consider the problems of allocating several heterogeneous objects owned by governments to a group of agents and how much agents should pay. Each agent receives at most one object and has nonquasi-linear preferences. Nonquasi-linear preferences describe environments in which large-scale payments influence agents' abilities to utilize objects or derive benefits from them. The "minimum price Walrasian (MPW) rule" is the rule that assigns a minimum price Walrasian equilibrium allocation to each preference profile. We establish that the MPW rule is the unique rule that satisfies the desirable properties of strategy-proofness, Pareto-efficiency, individual rationality, and nonnegative payment on the domain that includes nonquasi-linear preferences. This result does not only recommend the MPW rule based on those desirable properties, but also suggest that governments cannot improve upon the MPW rule once they consider them essential. Since the outcome of the MPW rule coincides with that of the simultaneous ascending (SA) auction, our result explains the pervasive use of the SA auction.

Keywords: minimum price Walrasian equilibrium, simultaneous ascending auction, strategy-proofness, efficiency, heterogeneous objects, nonquasi-linear preferences

JEL Classification: D44, D71, D61, D82

Suggested Citation

Morimoto, Shuhei and Serizawa, Shigehiro, Strategy-Proofness and Efficiency with Nonquasi-Linear Preferences: A Characterization of Minimum Price Walrasian Rule (August 10, 2012). ISER Discussion Paper No. 852, Available at SSRN: https://ssrn.com/abstract=2128945 or http://dx.doi.org/10.2139/ssrn.2128945

Shuhei Morimoto (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1, Mihogaoka
Ibaraki, Osaka, 567-0047
Japan

Shigehiro Serizawa

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
+81 6 6879 8558 (Phone)
+81 6 6878 2766 (Fax)

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