A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices

Steven J. Brams, Todd R. Kaplan, D. Marc Kilgour

    Research output: Contribution to journalArticle

    Abstract

    We describe a simple 2-stage mechanism whereby for two bargainers, a Buyer and a Seller, it is a weakly dominant strategy to report their true reservation prices in the 1st stage. If the Buyer reports a higher reservation price than the Seller, then the referee announces that there is a possibility for trade, and the bargainers proceed to make offers in a 2nd stage. The average of the 2nd-stage offers becomes the settlement if they both fall into the interval between the reported reservation prices; if only one offer falls into this interval, it is the settlement, but it is implemented with probability $$\frac{1}{2}$$12; if neither offer falls into the interval, there is no settlement. Comparisons are made with other bargaining mechanisms.

    Original languageEnglish (US)
    Pages (from-to)401-413
    Number of pages13
    JournalGroup Decision and Negotiation
    Volume24
    Issue number3
    DOIs
    StatePublished - May 1 2015

    Keywords

    • Bargaining
    • Incomplete information
    • Probabilistic implementation
    • Truth-telling mechanisms

    ASJC Scopus subject areas

    • Decision Sciences(all)
    • Arts and Humanities (miscellaneous)
    • Social Sciences(all)
    • Strategy and Management
    • Management of Technology and Innovation

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