a)
VCG mechanism:
outcomes:
x∗(v)=arg maxx(∑vi(x))
x∗(v−i)=arg maxx(∑j=ivj(x))
transfers:
Agent i receives
ti(v)=∑j=ivj(x∗(v))−∑j=ivj(x∗(v−i))
for aA size of the TV:
x is root of equation vA(x)=aAx−x3/36
for aB size of the TV:
x is root of equation vB(x)=aBx−x3/36
for aC size of the TV:
x is root of equation vC(x)=aCx−x3/36
b)
for aA = 10 :
vA(x)=10x−x3/36
for aB = 40 :
vB(x)=40x−x3/36
for aC = 50 :
vC(x)=50x−x3/36
∑vi(x)=100x−x3/12
(∑vi(x))′=100−x2/4=0
x=20
outcome that maximizes the sum of values:
x∗(v)=20
for Alice(A):
∑j=ivj(x)=90x−x3/18
∑j=ivj(x)=90−x2/6=0
x∗(v−A)=540=23.24
Alice receives:
tA=90⋅20−203/18−(90⋅23.24−23.243/18)=−38.72
for Bob(B):
∑j=ivj(x)=60x−x3/18
∑j=ivj(x)=60−x2/6=0
x∗(v−B)=360=18.97
Bob receives:
tB=60⋅20−203/18−(60⋅18.97−18.973/18)=−3.39
for Charlie(C):
∑j=ivj(x)=50x−x3/18
∑j=ivj(x)=50−x2/6=0
x∗(v−A)=300=17.32
Charlie receives:
tC=50⋅20−203/18−(50⋅17.32−17.323/18)=−21.79
So, Alice has to pay 38.72, Bob has to pay 3.39, Charlie has to pay 21.79
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