A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices

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

doi:10.1007/s10726-014-9395-5

A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices

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

Research output: Contribution to journal › Article › peer-review

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 language	English (US)
Pages (from-to)	401-413
Number of pages	13
Journal	Group Decision and Negotiation
Volume	24
Issue number	3
DOIs	https://doi.org/10.1007/s10726-014-9395-5
State	Published - May 1 2015

Keywords

Bargaining
Incomplete information
Probabilistic implementation
Truth-telling mechanisms

ASJC Scopus subject areas

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

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10.1007/s10726-014-9395-5

Cite this

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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.",

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A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices

Abstract

Keywords

ASJC Scopus subject areas

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