Efficient bidding with externalities

Inés Macho-Stadler, David Pérez-Castrillo, David Wettstein

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

Abstract

We implement a family of efficient proposals to share benefits generated in environments with externalities. These proposals extend the Shapley value to games with externalities and are parametrized through the method by which the externalities are averaged. We construct two slightly different mechanisms: one for environments with negative externalities and the other for positive externalities. We show that the subgame perfect equilibrium outcomes of these mechanisms coincide with the sharing proposals.

Original languageEnglish
Pages (from-to)304-320
Number of pages17
JournalGames and Economic Behavior
Volume57
Issue number2
DOIs
StatePublished - 1 Nov 2006

Keywords

  • Bidding
  • Externalities
  • Implementation
  • Shapley value

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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