Robust trading mechanisms with budget surplus and partial trade

Jesse A. Schwartz () and Quan Wen ()
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Jesse A. Schwartz: Kennesaw State University

Economic Theory Bulletin, 2018, vol. 6, issue 2, No 6, 208 pages

Abstract: Abstract In a bilateral bargaining problem with private values, Hagerty and Rogerson (J Econ Theory 42(1):94–107, 1987) showed that essentially all dominant strategy incentive compatible, ex post individually rational, and budget balanced mechanisms are posted-price mechanisms, where a price is drawn from a distribution, and trade occurs if both players benefit from trading at this price. In this paper, we demonstrate a feasible bargaining mechanism that yields more ex ante gains from trade than any posted-price (budget balanced) mechanism.

Keywords: Dominant strategy implementation; Vickrey–Clarke–Groves mechanisms; Bilateral bargaining; Budget balancedness (search for similar items in EconPapers)
JEL-codes: C72 C78 D82 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s40505-018-0138-7

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