On budget balance of the dynamic pivot mechanism

Research output: Contribution to journalArticle

Abstract

We modify the dynamic pivot mechanism of Bergemann and Välimäki (Econometrica, 2010) in such a way that lump-sum fees are collected from the players. We show that the modified mechanism satisfies ex-ante budget balance as well as ex-post efficiency, periodic ex-post incentive compatibility, and periodic ex-post individual rationality, as long as the Markov chain representing the evolution of players' private information is irreducible and aperiodic and players are sufficiently patient. We also show that the diverse preference assumption of Bergemann and Välimäki may preclude budget balance.

Original languageEnglish
Pages (from-to)206-213
Number of pages8
JournalGames and Economic Behavior
Volume94
DOIs
Publication statusPublished - 2015 Nov 1

Keywords

  • Bilateral trading
  • Budget balance
  • Dynamic mechanism design
  • The dynamic pivot mechanism
  • VCG mechanism

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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