American Economic Review Vol. 97 No. 2 2007

Designing Efficient Mechanisms for Dynamic Bilateral Trading Games

Susan Athey¹; Ilya Segal²

¹ Harvard University, Department of Economics, Littauer Center, 1875 Cambridge St., Cambridge, MA, 02138. · ² Stanford University, Department of Economics, Stanford, CA 94305-6072.

Abstract

This paper studies the problem of allocating a good between two players in each period of an infinite-horizon game. The players' valuations in each period are private information, and the valuations change over time. We analyze two special cases for the dynamics of valuations: correlated where players' valuations are exogenous but serially correlated; and learning by doing, where a player's past consumption improves his current distribution of valuations, but his valuations are otherwise uncorrelated. We analyze conditions under which there exists an efficient, Bayesian incentive-compatible (BIC), individually rational (IR), budget-balanced (BB) mechanism, when the mechanism designer has commitment power. We consider

DOI

10.1257/aer.97.2.131

Volume

97

Issue

2

Pages

131-136

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓