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On budget balance of the dynamic pivot mechanism

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  • Yoon, Kiho

Abstract

We modify the dynamic pivot mechanism of Bergemann and Välimäki (Econometrica, 2010) in such a way that lump-sum fees are collected from the players. We show that the modified mechanism satisfies ex-ante budget balance as well as ex-post efficiency, periodic ex-post incentive compatibility, and periodic ex-post individual rationality, as long as the Markov chain representing the evolution of players' private information is irreducible and aperiodic and players are sufficiently patient. We also show that the diverse preference assumption of Bergemann and Välimäki may preclude budget balance.

Suggested Citation

  • Yoon, Kiho, 2015. "On budget balance of the dynamic pivot mechanism," Games and Economic Behavior, Elsevier, vol. 94(C), pages 206-213.
    • Handle: RePEc:eee:gamebe:v:94:y:2015:i:c:p:206-213
    DOI: 10.1016/j.geb.2015.07.001
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    References listed on IDEAS

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    1. Dirk Bergemann & Juuso V‰lim‰ki, 2010. "The Dynamic Pivot Mechanism," Econometrica, Econometric Society, vol. 78(2), pages 771-789, March.
    2. Dirk Bergemann & Maher Said, 2010. "Dynamic Auctions: A Survey," Cowles Foundation Discussion Papers 1757, Cowles Foundation for Research in Economics, Yale University.
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    4. Andrzej Skrzypacz & Juuso Toikka, 2015. "Mechanisms for Repeated Trade," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 252-293, November.
    5. Steven R. Williams, 1999. "A characterization of efficient, bayesian incentive compatible mechanisms," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(1), pages 155-180.
    6. Kalyan Chatterjee & William Samuelson, 1983. "Bargaining under Incomplete Information," Operations Research, INFORMS, vol. 31(5), pages 835-851, October.
    7. 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.
    8. Yoon, Kiho, 2008. "The participatory Vickrey-Clarke-Groves mechanism," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 324-336, February.
    9. Susan Athey & Ilya Segal, 2013. "An Efficient Dynamic Mechanism," Econometrica, Econometric Society, vol. 81(6), pages 2463-2485, November.
    10. Alessandro Pavan & Ilya Segal & Juuso Toikka, 2014. "Dynamic Mechanism Design: A Myersonian Approach," Econometrica, Econometric Society, vol. 82(2), pages 601-653, March.
    11. Yoon, Kiho, 2001. "The Modified Vickrey Double Auction," Journal of Economic Theory, Elsevier, vol. 101(2), pages 572-584, December.
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    Cited by:

    1. Rohit Lamba, 2022. "Efficiency with(out) intermediation in repeated bilateral trade," Papers 2202.04201, arXiv.org.
    2. Kiho Yoon, 2015. "On the Uniqueness of Dynamic Groves Mechanisms," Discussion Paper Series 1505, Institute of Economic Research, Korea University.
    3. Kiho Yoon, 2021. "Dynamic mechanism design: An elementary introduction," Papers 2106.04850, arXiv.org.
    4. Garrett, Daniel F., 2023. "Ready to trade? On budget-balanced efficient trade with uncertain arrival," Games and Economic Behavior, Elsevier, vol. 138(C), pages 161-170.

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    More about this item

    Keywords

    The dynamic pivot mechanism; Dynamic mechanism design; Budget balance; VCG mechanism; Bilateral trading;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary 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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