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On Budget Balance of the Dynamic Pivot Mechanism

Kiho Yoon ()

No 1501, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We modify the dynamic pivot mechanism of Bergemann and VAalimAaki (Econometrica, 2010) in such a way that lump-sum fees are collected from the players. We show that the modi?ed mechanism satis?es ex-ante budget balance as well as ex-post e¡¾ciency, periodic ex-post incentive compatibility, and periodic ex-post individual rationality, as long as the Markov chain representing the evolution of players' private information is irreducible and aperiodic and players are sufficiently patient. We also show that the diverse preference assumption of Bergemann and VAalimAaki may preclude budget balance.

Keywords: The dynamic pivot mechanism; dynamic mechanism design; budget balance; VCG mechanism; bilateral bargaining (search for similar items in EconPapers)
JEL-codes: C73 D47 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-mfd and nep-mic
Date: 2015
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