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Bilateral trading with contingent contracts

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  • Kiho Yoon

    (Korea University)

Abstract

We study the bilateral trading problem under private information. We characterize the range of possible mechanisms which satisfy ex-post efficiency, incentive compatibility, individual rationality, and budget balance. In particular, we show that the famous Myerson–Satterthwaite impossibility result no longer holds when contingent contracts are allowed.

Suggested Citation

  • Kiho Yoon, 2020. "Bilateral trading with contingent contracts," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 445-461, June.
    • Handle: RePEc:spr:jogath:v:49:y:2020:i:2:d:10.1007_s00182-019-00699-9
    DOI: 10.1007/s00182-019-00699-9
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    References listed on IDEAS

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    1. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
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    Cited by:

    1. Pan, Lijun & Wang, Dazhong, 2021. "The broker-optimal bilateral trading mechanisms with linear contracts," Economics Letters, Elsevier, vol. 208(C).

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    More about this item

    Keywords

    Bilateral trading; Contingent contracts; Ex-post efficiency; Linear contracts; Royalty contracts;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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