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Economic Theory Bulletin

, Volume 6, Issue 2, pp 201–208 | Cite as

Robust trading mechanisms with budget surplus and partial trade

  • Jesse A. Schwartz
  • Quan Wen
Research Article
  • 19 Downloads

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 

JEL Classification

C72 C78 D82 

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Copyright information

© Society for the Advancement of Economic Theory 2018

Authors and Affiliations

  1. 1.Department of Economics, Finance, and Quantitative AnalysisKennesaw State UniversityKennesawUSA
  2. 2.Department of EconomicsUniversity of WashingtonSeattleUSA

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