A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices

Steven Brams (), Todd Kaplan and D. Marc Kilgour ()
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D. Marc Kilgour: Wilfrid Laurier University

Group Decision and Negotiation, 2015, vol. 24, issue 3, No 2, 413 pages

Abstract: Abstract We describe a simple 2-stage mechanism whereby for two bargainers, a Buyer and a Seller, it is a weakly dominant strategy to report their true reservation prices in the 1st stage. If the Buyer reports a higher reservation price than the Seller, then the referee announces that there is a possibility for trade, and the bargainers proceed to make offers in a 2nd stage. The average of the 2nd-stage offers becomes the settlement if they both fall into the interval between the reported reservation prices; if only one offer falls into this interval, it is the settlement, but it is implemented with probability $$\frac{1}{2}$$ 1 2 ; if neither offer falls into the interval, there is no settlement. Comparisons are made with other bargaining mechanisms.

Keywords: Bargaining; Truth-telling mechanisms; Probabilistic implementation; Incomplete information; C72; C78 (search for similar items in EconPapers)
Date: 2015
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Working Paper: A Simple Bargaining Mechanism That Elicits Truthful Reservation Prices (2011)
Working Paper: A Simple Bargaining Mechanism That Elicits Truthful Reservation Prices
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DOI: 10.1007/s10726-014-9395-5

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