Bilateral trade with the sealed bid k-double auction: Existence and efficiency

Mark A. Satterthwaite*, Steven R. Williams

*Corresponding author for this work

Research output: Contribution to journalArticle

120 Scopus citations

Abstract

For k in the unit interval, the k-double auction determines the terms of trade when a buyer and a seller negotiate transfer of an item. The buyer submits a bid b and the seller submits an offer s. Trade occurs if b exceeds s, at price kb + (1 - k) s. We model trade as a Bayesian game in which each trader privately knows his reservation value, but only has beliefs about the other trader's value. Existence of a multiplicity of equilibria is proven for a class of trader's beliefs. For generic beliefs, however, these equilibria are shown to be ex ante inefficient.

Original languageEnglish (US)
Pages (from-to)107-133
Number of pages27
JournalJournal of Economic Theory
Volume48
Issue number1
DOIs
StatePublished - Jun 1989

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Bilateral trade with the sealed bid k-double auction: Existence and efficiency'. Together they form a unique fingerprint.

Cite this