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On Efficient Trading Mechanisms with Ex-Post Individually Rational Traders

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  • Stefano Galavotti

    ()
    (Department of Applied Mathematics, University of Venice)

Abstract

This paper studies a bilateral trading setting where the two agents are not ex-ante identified, in the sense that each of them may end up being a net buyer or a net seller. We derive a sufficient condition that ensures the existence of an (ex-post) efficient, (ex-post) budget balanced, (interim) incentive compatible trading mechanism that always yields a positive net utility to all agents (ex-post individually rational). This result improves a former existence result based on interim individual rationality showing that the stronger requirement of ex-post individual rationality does not always rule out efficiency.

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File URL: http://virgo.unive.it/wpideas/storage/2008wp161.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 161.

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Length: 17 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:vnm:wpaper:161

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  1. Makowski Louis & Mezzetti Claudio, 1994. "Bayesian and Weakly Robust First Best Mechanisms: Characterizations," Journal of Economic Theory, Elsevier, vol. 64(2), pages 500-519, December.
  2. Steven R. Williams & Georgia Kosmopoulou, 1998. "The robustness of the independent private value model in Bayesian mechanism design," Economic Theory, Springer, vol. 12(2), pages 393-421.
  3. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
  4. Hagerty, Kathleen M. & Rogerson, William P., 1987. "Robust trading mechanisms," Journal of Economic Theory, Elsevier, vol. 42(1), pages 94-107, June.
  5. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
  6. Gresik, Thomas A., 1991. "Ex ante efficient, ex post individually rational trade," Journal of Economic Theory, Elsevier, vol. 53(1), pages 131-145, February.
  7. Georgia Kosmopoulou, 1999. "Payoff equivalence between Bayesian and ex post individually rational dominant strategy mechanisms," Economic Theory, Springer, vol. 13(1), pages 229-237.
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