Partnerships and double auctions with interdependent valuations. (Q1408641)

The author derives models of double auctions with interdependent valuations, with forced participation and with veto. Conditions that bidding strategies constitute a Bayes-Nash equilibrium are obtained. The authors' conclusion: ``The k-double auction is a favorable mechanism to dissolve a partnership since it has simple rules that do not depend on specifications of the agents' valuations. If the interdependent components of the valuation functions are small it can be applied without worrying about agents' participation decisions. Since this is not true any more if the influence of the other agent's information becomes larger, the rules of the k-double auction have to allow for blocking the dissolution. This is done by giving partners the possibility to veto against a dissolution. Symmetric equilibria of this k-double auction with veto are derived for k = 1/2 and it is shown that even though the mechanism is not always optimal, it succeeds in realizing gains from trade. The rules remain simple and the mechanism designer does not need to know the distribution of types to determine those types not willing to dissolve the partnership. This is done by the participating agents themselves. An exemplarily comparison with another dissolution mechanism shows that (in contrast to a private valuations model) the mechanism designer can construct more efficient mechanisms if she is familiar with specifications of the valuations.''