Efficient trading on a network with incomplete information

Hu Lu () and Yuntong Wang ()
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Hu Lu: Applied Research and Analysis Directorate, Health Canada
Yuntong Wang: Department of Economics, University of Windsor

No 1405, Working Papers from University of Windsor, Department of Economics

Abstract: This paper considers a trading problem on a network with incomplete information. We consider a simple water trading problem in which three agents are located in a linear order along a river. Upper stream agents can sell some amount of the water to their downstream but not the other way around. The middle agent can be both a seller and a buyer. Agents have private information on their utility of water, which we assume is non- linear. We ask if there is an efficient trading mechanism for the allocation of water. We show that if agents have highly asymmetric initial endowments of water, incentive-compatible, individually rational, budget-balanced mechanisms exist that are also ex-post efficient.

Keywords: Network; Incomplete Information; Water Trading; Mechanism Design. (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014-10-27
New Economics Papers: this item is included in nep-cta, nep-gth and nep-upt
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http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1405.pdf First version, 2014 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:wis:wpaper:1405

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