Efficient mechanism for resource allocation with quadratic payments and its realization via an iterative bargaining process

Abstract

The problem of Pareto-efficient resource allocation among rational agents is considered. The mechanism that implements efficient allocation as Nash equilibrium in case when utility is transferable among agents is offered. The approach to solution of allotment problems as multicriteria public choice problems lies in the basis of this mechanism, that allows to implement Groves-Ledyard mechanism, which was initially designated to the solution of public good problems. It is shown, that there is exist the only Nash equilibrium in a game among agents induced by the mechanism developed. For the case when utility functions are private information of agents, it is shown, that efficient allocation may be realized via an iterative bargaining process based on this mechanism, if agents behave according to Cournot dynamics. Possibility to reduce agent's messages space to a scalar one in iterative bargaining process is demonstrated. It is also shown that mechanism developed may be inconsistent for some nontrivial agent's behavior – there exist some game solutions which can be reached via iterative bargaining process but are not Nash equilibrium and don't yield efficient resource allocation.