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

Mark A. Satterthwaite; Steven R. Williams

doi:10.1016/0022-0531(89)90121-X

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

Mark A. Satterthwaite^*, Steven R. Williams

^*Corresponding author for this work

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

148 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 language	English (US)
Pages (from-to)	107-133
Number of pages	27
Journal	Journal of Economic Theory
Volume	48
Issue number	1
DOIs	https://doi.org/10.1016/0022-0531(89)90121-X
State	Published - Jun 1989

Funding

* We thank Michael Chwe, Tom Gresik, Roger Myerson, and three anonymous reviewers for their help. This material is based upon work supported by the National Science Foundation Nos. SES-8520247 and SES-8705649. We also acknowledge the support of Northwestern University’s Research Grants Committee and its Center for Advanced Study in Managerial Economics and Decision Sciences.

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/0022-0531(89)90121-X

Cite this

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

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