Abstract

We investigate the stability of internet platform trading mechanisms using the notion of ex-ante incentive compatible core defined by Forges et al. (2002) in the context of an exchange economy. A mechanism can be blocked by a single buyer and seller pair if they can find an interim incentive-compatible trading mechanism that gives them higher ex-ante expected utilities. Standard double auction mechanisms like the trade reduction mechanism and McAfee double auction mechanism may not be single-buyer–single-seller (SBSS) ex-ante stable. We characterize interim incentive-compatible, interim individually-rational, symmetric and revenue-maximizing mechanisms that are SBSS ex-ante stable using methods in Myerson and Satterthwaite (1983).

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.