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Implementable and ex-post IR rules in bilateral trading with discrete values

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  • Flesch, János
  • Schröder, Marc
  • Vermeulen, Dries

Abstract

We study bargaining problems between one buyer and one seller for a single object when each set of valuations is finite. We derive a necessary and sufficient condition for interim-implementable trading rules, analogous to the result in Myerson and Satterthwaite (1983), and a necessary condition for mechanisms that are free from ex post regret on and off equilibrium path. Based on these two theorems, our contribution is three-fold. First, we illustrate the results by means of three examples. Second, in contrast to the continuous model, there always exist strictly positive probability mass functions such that ex post efficiency and interim-implementability is feasible. Third, we show the difference between interim- and ex post-implementation. In the class of threshold trading rules, interim-implementation only precludes inefficient trade, while ex post-implementation is equivalent to posted price implementation.

Suggested Citation

  • Flesch, János & Schröder, Marc & Vermeulen, Dries, 2016. "Implementable and ex-post IR rules in bilateral trading with discrete values," Mathematical Social Sciences, Elsevier, vol. 84(C), pages 68-75.
    • Handle: RePEc:eee:matsoc:v:84:y:2016:i:c:p:68-75
    DOI: 10.1016/j.mathsocsci.2016.08.003
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    References listed on IDEAS

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    Cited by:

    1. Hagen, Martin, 2019. "Collusion-proof and fair auctions," Economics Letters, Elsevier, vol. 185(C).
    2. Kamyar Kargar & Halil Ibrahim Bayrak & Mustafa Çelebi Pinar, 2018. "Robust bilateral trade with discrete types," EURO Journal on Computational Optimization, Springer;EURO - The Association of European Operational Research Societies, vol. 6(4), pages 367-393, December.

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