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) |
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Pages (from-to) | 107-133 |
Number of pages | 27 |
Journal | Journal of Economic Theory |
Volume | 48 |
Issue number | 1 |
DOIs | |
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