Bilateral trade with the sealed bid k-double auction: Existence and efficiency

doi:10.1016/0022-0531(89)90121-X

Journal of Economic Theory

Volume 48, Issue 1, June 1989, Pages 107-133

https://doi.org/10.1016/0022-0531(89)90121-X Get rights and content

For k in the unit interval, the k-double auction determines the terms of trade when a buyer and a seller negotiate transfer of an item. The buyer submits a bid b and the seller submits an offer s. Trade occurs if b exceeds s, at price kb + (1 − k) s. We model trade as a Bayesian game in which each trader privately knows his reservation value, but only has beliefs about the other trader's value. Existence of a multiplicity of equilibria is proven for a class of trader's beliefs. For generic beliefs, however, these equilibria are shown to be ex ante inefficient.

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: We thank Michael Chwe, Tom Gresik, Roger Myerson, and three anonymous reviewers for their help. This material is based upon work supported by the National Science Foundation Nos. SES-8520247 and SES-8705649. We also acknowledge the support of Northwestern University's Research Grants Committee and its Center for Advanced Study in Managerial Economics and Decision Sciences.

View full text

Bilateral trade with the sealed bid k-double auction: Existence and efficiency

J. Pub. Econ.

Econometrica

Amer. Econ. Rev.

Ann. of Math.

Bargaining under incomplete information

Oper. Res.

Bargaining and competition, Part I: Characterization

Econometrica

Games with incomplete information played by Bayesian players: Part I

Management Sci.

Games with incomplete information played by Bayesian players: Part II

Management Sci.

Games with incomplete information played by Bayesian players: Part III

Management Sci.