We introduce endogenous fees for participating in second-price auction which we use for a two-stage mechanism to solve King Solomon’s dilemma. They are positive for all agents. They are nonetheless shown to maintain the agents’ incentives for truthful bidding and guarantee participation by the highest-value agent. This feature of the endogenous fees is powerful enough for the efficient outcome to uniquely result from one round elimination of weakly dominated strategies, followed by at most four rounds of iterative elimination of strictly dominated stage-strategies. We provide an extension to cases with n agents and k identical prizes.
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