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Efficient trading with nonlinear utility. (English) Zbl 1232.91490
Summary: In an environment in which agents have nonlinear utility and sufficiently asymmetric initial endowments, we show that efficient trading is achievable. This result is in contrast with [R. B. Myerson and M. A. Satterthwaite, J. Econ. Theory 29, 265–281 (1983; Zbl 0523.90099)], which shows efficient trading is not possible if agents have linear utility and asymmetric initial endowments. Our result is also different from [P. Cramton, R. Gibbons and P. Klemperer, Econometrica 55, 615–632 (1987; Zbl 0632.90097)], in which they maintain the linear utility assumption as in Myerson and Satterthwaite but assume that traders’ initial endowments are relatively symmetric.
91B60 Trade models
91B26 Auctions, bargaining, bidding and selling, and other market models
91B16 Utility theory
Full Text: DOI
[1] Cramton, P.; Gibbons, R.; Klemperer, P., Dissolving a partnership efficiently, Econometrica, 55, 615-632, (1987) · Zbl 0632.90097
[2] Gresik, T.A.; Satterthwaite, M.A., The rate at which a simple market converges to efficiency as the number of traders increases: an asymptotic result for optimal trading mechanisms, Journal of economic theory, 48, 304-332, (1989) · Zbl 0673.90016
[3] Ledyard, J.O.; Palfrey, T.R., A genereal characterization of interim efficient mechanisms for independent linear environments, Journal of economic theory, 133, 441-466, (2007) · Zbl 1280.91068
[4] Lu, H.; Robert, J., Optimal trading mechanisms with ex ante unidentified traders, Journal of economic theory, 97, 50-80, (2001) · Zbl 0994.91043
[5] Myerson, R.B., Incentive compatibility and the bargaining problem, Econometrica, 47, 61-73, (1979) · Zbl 0399.90008
[6] Myerson, R.B., Optimal auction design, Mathematics of operations research, 6, 58-73, (1981) · Zbl 0496.90099
[7] Myerson, R.B.; Satterthwaite, M.A., Efficient mechanisms for bilateral trading, Journal of economic theory, 29, 265-281, (1983) · Zbl 0523.90099
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