Optimal bilateral trade of multiple objects

Eilat, Ran; Pauzner, Ady

doi:10.1016/j.geb.2010.04.005

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2015

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“…A reporting strategy is a collection pm n q 8 n"0 , where m n : tl, hu nˆt l, hu Ñ ∆ptl, huq maps previous reports and the value during round n into a report for that round. 15 The policy is incentive compatible if truth-telling (that is, reporting the current value faithfully, independent of past reports) is an optimal reporting strategy. Our first objective is to solve for the optimal (incentive-compatible) policy, that is, for the policy that maximizes the principal's payoff subject to incentive compatibility.…”

Section: The Modelmentioning

confidence: 99%

Dynamic Mechanisms Without Money

Guo

Hörner

2015

SSRN Journal

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We analyze the optimal design of dynamic mechanisms in the absence of transfers. The designer uses future allocation decisions to elicit private information. Values evolve according to a two-state Markov chain. We solve for the optimal allocation rule. Unlike with transfers, efficiency decreases over time. In the long-run, polarization obtains, but not necessarily immiseration. A simple implementation is provided. The agent is endowed with a given "budget," corresponding to a number of units he is entitled to claim in a row. Considering the limiting continuous-time environment, we show that persistence hurts.

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Section: The Modelmentioning

confidence: 99%