Efficiency and Budget Balance in General Quasi-linear Domains.

We consider efficiency and budget balance in general quasi-linear domains. Green and Laffont (1979) proved that one cannot generically achieve both. We consider strategyproof budget-balanced mechanisms with bounded valuations that are approximately efficient. We show that a deterministic, strategyproof, and budget-balanced mechanism must have a sink whose valuation is ignored in the decision, and is compensated with all the leftover money. We find a tight lower bound on the inefficiencies of strategyproof, budget-balanced mechanisms using this result. The bound shows that the inefficiency asymptotically disappears when the number of agents is large—we provide worst-case bounds and the best possible rate of convergence.