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On the existence of efficient multilateral trading mechanisms with interdependent values

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  • Kwanghyun Kim

    (School of Data Science, Capital University of Economics and Business)

Abstract

This paper studies multilateral trading problems in which agents’ valuations for items are interdependent. Assuming that each agent’s information has a greater marginal effect on her own valuation than on the other agents’ valuations, the paper identifies a necessary and sufficient condition for the existence of trading mechanisms satisfying efficiency, ex-post incentive compatibility, ex-post individual rationality, and ex-post budget balance. The paper presents a trading mechanism that satisfies the four properties when the necessary and sufficient condition holds and shows that this mechanism maximizes the ex-post budget surplus among all efficient, ex-post incentive compatible, and ex-post individually rational trading mechanisms. The paper examines an environment where each agent can possess at most one unit of an item, and her information about the item is one-dimensional. It then extends the results to two general environments: the multiple units environment and the multidimensional information environment.

Suggested Citation

  • Kwanghyun Kim, 2024. "On the existence of efficient multilateral trading mechanisms with interdependent values," International Journal of Game Theory, Springer;Game Theory Society, vol. 53(2), pages 579-608, June.
    • Handle: RePEc:spr:jogath:v:53:y:2024:i:2:d:10.1007_s00182-023-00883-y
    DOI: 10.1007/s00182-023-00883-y
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    References listed on IDEAS

    as
    1. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-1259, September.
    2. Kojima, Fuhito & Yamashita, Takuro, 2017. "Double auction with interdependent values: incentives and efficiency," Theoretical Economics, Econometric Society, vol. 12(3), September.
    3. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    4. Pasha Andreyanov & Tomasz Sadzik, 2021. "Robust Mechanism Design of Exchange," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(2), pages 521-573.
    5. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
    6. 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.
    7. Philippe Jehiel & Moritz Meyer-ter-Vehn & Benny Moldovanu & William R. Zame, 2006. "The Limits of ex post Implementation," Econometrica, Econometric Society, vol. 74(3), pages 585-610, May.
    8. McAfee, R. Preston, 1992. "A dominant strategy double auction," Journal of Economic Theory, Elsevier, vol. 56(2), pages 434-450, April.
    9. Rustichini, Aldo & Satterthwaite, Mark A & Williams, Steven R, 1994. "Convergence to Efficiency in a Simple Market with Incomplete Information," Econometrica, Econometric Society, vol. 62(5), pages 1041-1063, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Interdependent values; Ex-post Nash equilibrium; Multilateral trading mechanisms;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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