Bilateral Bargaining in an Ambiguous Environment
We perturb the bilateral bargaining model by introducing small ambiguity (via the epsilon contamination model) about the agents' types. We assume that the preferences are characterized by ambiguity aversion (Gilboa-Schmeidler). The rest of the setup is exactly as in Myerson and Satterthwaite . And we show that in this environment, it is possible to design a mechanism that generates almost-efficient trade. Crucially, the mechanism has to be extensive-form; standard (normal form) direct revelation mechanism can only generate outcome that is continuous with respect to the amount of ambiguity.
|Date of creation:||May 2012|
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- Subir Bose & Arup Daripa, 2008.
"A Dynamic Mechanism and Surplus Extraction Under Ambiguity,"
Discussion Papers in Economics
08/24, Department of Economics, University of Leicester.
- Bose, Subir & Daripa, Arup, 2009. "A dynamic mechanism and surplus extraction under ambiguity," Journal of Economic Theory, Elsevier, vol. 144(5), pages 2084-2114, September.
- Subir Bose & Arup Daripa, 2007. "A Dynamic Mechanism and Surplus Extraction Under Ambiguity," Birkbeck Working Papers in Economics and Finance 0716, Birkbeck, Department of Economics, Mathematics & Statistics.
- Epstein, Larry G. & Schneider, Martin, 2003.
Journal of Economic Theory,
Elsevier, vol. 113(1), pages 1-31, November.
- Marciano Siniscalchi, 2006.
"Dynamic Choice Under Ambiguity,"
1430, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bose, Subir & Ozdenoren, Emre & Pape, Andreas, 2006.
"Optimal auctions with ambiguity,"
Econometric Society, vol. 1(4), pages 411-438, December.
- Andreas Pape & Subir Bose & Emre Ozdenoren, 2004. "Optimal auctions with ambiguity," Econometric Society 2004 North American Summer Meetings 609, Econometric Society.
- Bodoh-Creed, Aaron L., 2012. "Ambiguous beliefs and mechanism design," Games and Economic Behavior, Elsevier, vol. 75(2), pages 518-537.
- Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, vol. 53(2), pages 137-152, September.
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