Balanced Ranking Mechanisms

Abstract: In the private values single object auction model, we construct a satisfactory mechanism - a symmetric, dominant strategy incentive compatible, and budget-balanced mechanism. Our mechanism allocates the object to the highest valued agent with more than 99% probability provided there are at least 14 agents. It is also ex-post individually rational. We show that our mechanism is optimal in a restricted class of satisfactory ranking mechanisms. Since achieving efficiency through a dominant strategy incentive compatible and budget-balanced mechanism is impossible in this model, our results illustrate the limits of this impossibility.