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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.
MSC:
91B60 Trade models
91B26 Auctions, bargaining, bidding and selling, and other market models
91B16 Utility theory
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[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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