EFFICIENT ALLOCATION OF A PIE - DIVISIBLE CASE OF SOLOMON,KING DILEMMA

An allocation of a limited amount of a divisible resource is to be mad e among finitely many agents. The goal is to distribute this resource as awards so that an appropriate weighted sum of individual payoffs is maximized. While the planner does not know anything about individual characteristics, agents possess complete information. A simple multist age mechanism is constructed that will achieve the efficient allocatio n in subgame perfect equilibria. Although the mechanism uses a pricing scheme in certain eventualities, no payments occur in equilibrium. Jo urnal of Economic Literature Classification Number: D71. (C) 1996 Acad emic Press, Inc.