Negotiation-range mechanisms: exploring the limits of truthful efficient markets

Authors:
Yair Bartal;Rica Gonen;Pierfrancesco La Mura
Affiliations:
The Hebrew University of Jerusalem, Jerusalem, Israel;The Hebrew University of Jerusalem, Jerusalem, Israel;Leipzig Graduate School of Management, Leipzig, Germany
Venue:
EC '04 Proceedings of the 5th ACM conference on Electronic commerce
Year:
2004

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Abstract

This paper introduces a new class of mechanisms based on negotiation between market participants. This model allows us to circumvent Myerson and Satterthwaite's impossibility result and present a bilateral market mechanism that is efficient, individually rational, incentive compatible, and budget balanced in the single-unit heterogeneous setting. The underlying scheme makes this combination of desirable qualities possible by reporting a price range for each buyer-seller pair that defines a zone of possible agreements, while the final price is left open for negotiation.