Open AccessBilateral trade with a benevolent intermediary
Author(s) -
Eilat Ran,
Pauzner Ady
Publication year - 2021
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te3703
Subject(s) - commit , intermediary , credibility , outcome (game theory) , negotiation , microeconomics , interim , constraint (computer aided design) , mechanism design , business , computer science , economics , marketing , political science , mechanical engineering , database , law , engineering
We study intermediaries who seek to maximize gains from trade in bilateral negotiations. Intermediaries are players: they cannot commit to act against their objective function and deny, in some cases, trade they believe to be beneficial. This impairs their ability to assist the parties relative to conventional mechanisms. We analyze this limited commitment environment as a standard mechanism design problem with an additional “credibility” constraint, requiring that every outcome be interim‐optimal conditional on available information. We investigate how such intermediaries communicate with the parties, analyze the tradeoffs they face, and study the bounds on what they can achieve.