American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Buying from a Group
American Economic Review
vol. 114,
no. 8, August 2024
(pp. 2596–2632)
Abstract
A buyer procures a good owned by a group of sellers whose heterogeneous cost of trade is private information. The buyer must either buy the whole good or nothing, and sellers share the transfer in proportion to their share of the good. We characterize the optimal mechanism: trade occurs if and only if the buyer's benefit of trade exceeds a weighted average of sellers' virtual costs. These weights are endogenous, with sellers who are ex ante less inclined to trade receiving higher weight. This mechanism always outperforms posted-price mechanisms. An extension characterizes the entire Pareto frontier.Citation
Haghpanah, Nima, Aditya Kuvalekar, and Elliot Lipnowski. 2024. "Buying from a Group." American Economic Review, 114 (8): 2596–2632. DOI: 10.1257/aer.20230914Additional Materials
JEL Classification
- D44 Auctions
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D82 Asymmetric and Private Information; Mechanism Design
- Q15 Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
- Q24 Renewable Resources and Conservation: Land