TITLE:
A Generalized Bilateral Trading Model
AUTHORS:
Rongchuan Tao
KEYWORDS:
Bilateral Trading, Mechanism Design, Individual Rationality, Incentive Compatibility, Ex Post Efficient, Generalized Model
JOURNAL NAME:
Open Journal of Business and Management,
Vol.6 No.3,
June
12,
2018
ABSTRACT: In the bilateral trading model developed by Myerson [1], an ex post efficient
mechanism that satisfies incentive compatibility and individual rationality has
been proved to be not existed. This paper is aimed at the discussion of modified
bilateral trading model where the buyer and seller’s valuations for the
object are assumed to be not independent. Under such assumption, we concern
about the existence of an ex post efficient mechanism satisfying individual
compatible and individual rational conditions. We will give a necessary
condition of such mechanism, not precisely though, to identify the existence.
At the end of this paper, we provide some empirical evidences about the
non-independent assumption and suggest some directions for further research,
both empirical and theoretical.