A Simple Bargaining Mechanism That Elicits Truthful Reservation Prices
AbstractWe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 28999.
Date of creation: 18 Feb 2011
Date of revision:
Bargaining; truth-telling mechanisms; probabilistic implementation; incomplete information.;
Other versions of this item:
- Brams, Steven J. & Kaplan, Todd & Kilgour, D. Marc, . "A Simple Bargaining Mechanism That Elicits Truthful Reservation Prices," Working Papers WP2011/2, University of Haifa, Department of Economics, revised 22 Feb 2011.
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-CTA-2011-02-26 (Contract Theory & Applications)
- NEP-GTH-2011-02-26 (Game Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Myerson, Roger B. & Satterthwaite, Mark A., 1983.
"Efficient mechanisms for bilateral trading,"
Journal of Economic Theory,
Elsevier, vol. 29(2), pages 265-281, April.
- Steven J. Brams & D. Marc Kilgour, 2001. "Competitive Fair Division," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 418-443, April.
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