TY - JOUR
T1 - Bilateral trade with the sealed bid k-double auction
T2 - Existence and efficiency
AU - Satterthwaite, Mark A.
AU - Williams, Steven R.
N1 - Funding Information:
* 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.
PY - 1989/6
Y1 - 1989/6
N2 - 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.
AB - 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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U2 - 10.1016/0022-0531(89)90121-X
DO - 10.1016/0022-0531(89)90121-X
M3 - Article
AN - SCOPUS:33846666881
SN - 0022-0531
VL - 48
SP - 107
EP - 133
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 1
ER -