Bargaining Mechanisms for One-Way Games

Andrés Abeliuk, Gerardo Berbeglia and Pascal Van Hentenryck
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Andrés Abeliuk: National Information and Communications Technology Australia, NICTA Victoria Lab, West Melbourne, VIC 3003, Australia
Gerardo Berbeglia: National Information and Communications Technology Australia, NICTA Victoria Lab, West Melbourne, VIC 3003, Australia
Pascal Van Hentenryck: National Information and Communications Technology Australia, NICTA Victoria Lab, West Melbourne, VIC 3003, Australia

Games, 2015, vol. 6, issue 3, 1-21

Abstract: We introduce one-way games, a two-player framework whose distinguishable feature is that the private payoff of one (independent) player is determined only by her own strategy and does not depend on the actions taken by the other (dependent) player. We show that the equilibrium outcome in one-way games without side payments and the social cost of any ex post efficient mechanism can be far from the optimum. We also show that it is impossible to design a Bayes–Nash incentive-compatible mechanism for one-way games that is budget-balanced, individually rational and efficient. To address this negative result, we propose a privacy-preserving mechanism based on a single-offer bargaining made by the dependent player that leverages the intrinsic advantage of the independent player. In this setting the outside option of the dependent player is not known a priori; however, we show that the mechanism satisfies individual rationality conditions, is incentive-compatible, budget-balanced and produces an outcome that is more efficient than the equilibrium without payments. Finally, we show that a randomized multi-offer extension brings no additional benefit in terms of efficiency.

Keywords: bargaining; mechanism design; price of anarchy; distributed problem solving (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2015
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