Template-Type: ReDIF-Paper 1.0
Title:				Optimal Private Good Allocation: The Case for a Balanced Budget
Author-Name: 			Moritz Drexl 
Author-Name: 			Andreas Kleiner
Author-Email:			drexl@uni-bonn.de 
Author-Email:			akleiner@uni-bonn.de
Classification-JEL:	
Keywords:		Mechanism design, private information, bilateral trade, budget balance, Myerson-Satterthwaite Theorem
Abstract:		In an independent private value auction environment, we are interested in
				strategy-proof mechanisms that maximize the agents' residual surplus, that
				is, the utility derived from the physical allocation minus transfers accruing
				to an external entity. We find that, under the assumption of an increasing
				hazard rate of type distributions, an optimal deterministic mechanism never
				extracts any net payments from the agents, \ie it will be budget-balanced.
				Specifically, optimal mechanisms have a simple ``posted price'' or ``option''
				form. In the bilateral trade environment, we obtain optimality of
				posted price mechanisms without any assumption on type distributions,
				thereby providing a rationale for confining attention to budget-balanced
				mechanisms.		
Length:	
Creation date:		2012-09
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse03_2012.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse03_2012