IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v169y2017icp218-233.html
   My bibliography  Save this article

Incentive compatible and stable trade mechanisms on networks

Author

Listed:
  • Bochet, Olivier
  • İlkılıç, Rahmi

Abstract

We study a network of buyers and sellers where each seller owns an indivisible object and has no incentive to keep it, while each buyer has a downward sloping demand curve which is private information. Only the connected buyer-seller pairs can engage in trade. We search for trade mechanisms that are efficient, strategy-proof, bilateral trade stable and individually rational. In general, there does not exist a trade mechanism simultaneously satisfying these properties. The tension between strategy-proofness and bilateral trade stability is generated by the intersection between sets of competitors of a buyer at different sellers. Such intersections often allow the buyer to manipulate (via demand reductions) the prices paid in the network. The observed tension can be resolved if and only if the underlying network is cycle-free. In such a case, there is a unique trade mechanism which satisfies our four properties, a generalized Vickrey auction.

Suggested Citation

  • Bochet, Olivier & İlkılıç, Rahmi, 2017. "Incentive compatible and stable trade mechanisms on networks," Journal of Economic Theory, Elsevier, vol. 169(C), pages 218-233.
  • Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:218-233
    DOI: 10.1016/j.jet.2017.02.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S002205311730025X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jet.2017.02.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Matt Elliott & Francesco Nava, 2015. "Decentralized Bargaining: Efficiency and the Core," STICERD - Theoretical Economics Paper Series /2015/567, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    2. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
    3. Abreu, Dilip & Manea, Mihai, 2012. "Bargaining and efficiency in networks," Journal of Economic Theory, Elsevier, vol. 147(1), pages 43-70.
    4. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Shuangquan & Yang, Qiang & Cai, Huaxiang & Yan, Minghui & Zhang, Maolin & Wu, Dianning & Xie, Mengfei, 2019. "Market reform of Yunnan electricity in southwestern China: Practice, challenges and implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bedayo, Mikel & Mauleon, Ana & Vannetelbosch, Vincent, 2016. "Bargaining in endogenous trading networks," Mathematical Social Sciences, Elsevier, vol. 80(C), pages 70-82.
    2. Jackson, Matthew O. & Zenou, Yves, 2015. "Games on Networks," Handbook of Game Theory with Economic Applications,, Elsevier.
    3. Agranov, M. & Elliott, M., 2017. "Commitment and (In)Efficiency: A Bargaining Experiment," Cambridge Working Papers in Economics 1743, Faculty of Economics, University of Cambridge.
    4. Alison Watts, 2016. "Auctions Versus Private Negotiations in Buyer-Seller Networks," Games, MDPI, vol. 7(3), pages 1-14, August.
    5. Donna, Javier D. & Schenone, Pablo & Veramendi, Gregory F., 2020. "Networks, frictions, and price dispersion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 406-431.
    6. Thành Nguyen, 2015. "Coalitional Bargaining in Networks," Operations Research, INFORMS, vol. 63(3), pages 501-511, June.
    7. BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012. "Bargaining and delay in trading networks," LIDAM Discussion Papers CORE 2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. John Birge & Ozan Candogan & Hongfan Chen & Daniela Saban, 2021. "Optimal Commissions and Subscriptions in Networked Markets," Manufacturing & Service Operations Management, INFORMS, vol. 23(3), pages 569-588, May.
    9. Gauer, F. & Hellmann, T., 2017. "Strategic formation of homogeneous bargaining networks," Games and Economic Behavior, Elsevier, vol. 106(C), pages 51-74.
    10. Bayati, Mohsen & Borgs, Christian & Chayes, Jennifer & Kanoria, Yash & Montanari, Andrea, 2015. "Bargaining dynamics in exchange networks," Journal of Economic Theory, Elsevier, vol. 156(C), pages 417-454.
    11. Nava, Francesco, 2015. "Efficiency in decentralized oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 157(C), pages 315-348.
    12. Wittwer, Milena, 2017. "Centralizing Disconnected Markets? An Irrelevance Result," MPRA Paper 76534, University Library of Munich, Germany.
    13. Alison Watts, 2016. "Two ways to auction off an uncertain good," Journal of Economics, Springer, vol. 119(1), pages 1-15, September.
    14. Gauer, Florian & Hellmann, Tim, 2017. "Strategic formation of homogeneous bargaining networks," Center for Mathematical Economics Working Papers 529, Center for Mathematical Economics, Bielefeld University.
    15. Gauer, Florian, 2015. "Strategic Formation of Homogeneous Bargaining Networks," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112943, Verein für Socialpolitik / German Economic Association.
    16. Cho, Myeonghwan, 2021. "Trading networks of price-taking buyers and sellers," Journal of Economic Theory, Elsevier, vol. 196(C).
    17. Thành Nguyen & Karthik Kannan, 2021. "Welfare Implications in Intermediary Networks," Information Systems Research, INFORMS, vol. 32(2), pages 378-393, June.
    18. Talamàs, Eduard, 2019. "Price dispersion in stationary networked markets," Games and Economic Behavior, Elsevier, vol. 115(C), pages 247-264.
    19. Andrea Attar & Thomas Mariotti & François Salanié, 2021. "Entry-Proofness and Discriminatory Pricing under Adverse Selection," American Economic Review, American Economic Association, vol. 111(8), pages 2623-2659, August.
    20. Rodrigo J. Harrison & Roberto Munoz, 2003. "Stability and Equilibrium Selection in a Link Formation Game," Game Theory and Information 0306004, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:218-233. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.