A Simple Bargaining Mechanism That Elicits Truthful Reservation Prices

Steven Brams (), Todd Kaplan and D. Marc Kilgour

MPRA Paper from University Library of Munich, Germany

Abstract: We describe a simple 2-stage mechanism that induces two bargainers to be truthful in reporting their reservation prices in a 1st stage. If these prices criss-cross, the referee reports that they overlap, and the bargainers proceed to make offers in a 2nd stage. The average of the 2nd-stage offers becomes the settlement if both offers fall into the overlap interval; if only one offer falls into this interval, it is the settlement, but is implemented with probability 1/2; if neither offer falls into the interval, there is no settlement. Thus, if the bargainers reach the 2nd stage, they know their reservation prices overlap even if they fail to reach a settlement, possibly motivating them to try again.

Keywords: Bargaining; truth-telling mechanisms; probabilistic implementation; incomplete information. (search for similar items in EconPapers)
JEL-codes: C72 C78 D02 D74 J52 (search for similar items in EconPapers)
Date: 2011-02-18
New Economics Papers: this item is included in nep-cta and nep-gth
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Related works:
Journal Article: A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices (2015)
Working Paper: A Simple Bargaining Mechanism That Elicits Truthful Reservation Prices
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28999

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