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A simple status quo that ensures participation (with application to efficient bargaining)

Author

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  • , R.

    (Department of Economics, Stanford University)

  • , D.

    (Department of Economics, Northwestern University)

Abstract
We consider Bayesian incentive-compatible mechanisms with independent types and either private values or interdependent values that satisfy a form of "congruence." We show that in these settings, interim participation constraints are satisfied when the status quo is the randomized allocation that has the same distribution as the equilibrium allocation in the mechanism. Moreover, when utilities are convex in the allocation, we can instead satisfy participation constraints with the deterministic status quo equal to the expected equilibrium allocation in the mechanism. For quasilinear settings, these observations imply the possibility of efficient bargaining when the status quo specifies the expected efficient decision provided that the total surplus is convex in the decision.

Suggested Citation

  • , R. & , D., 2011. "A simple status quo that ensures participation (with application to efficient bargaining)," Theoretical Economics, Econometric Society, vol. 6(1), January.
    • Handle: RePEc:the:publsh:591
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    Citations

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    Cited by:

    1. Kos, Nenad & Messner, Matthias, 2013. "Extremal incentive compatible transfers," Journal of Economic Theory, Elsevier, vol. 148(1), pages 134-164.
    2. Yuval Salant & Ron Siegel, 2016. "Reallocation Costs and Efficiency," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 203-227, February.
    3. Hoffmann, Timo & Renes, Sander, 2016. "Flip a coin or vote : an Experiment on choosing group decision," Working Papers 16-11, University of Mannheim, Department of Economics.
    4. Loertscher, Simon & Wasser, Cédric, 2019. "Optimal structure and dissolution of partnerships," Theoretical Economics, Econometric Society, vol. 14(3), July.
    5. Petra Nieken & Patrick W. Schmitz, 2023. "Contracting under asymmetric information and externalities: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 26(5), pages 989-1021, November.
    6. Grüner, Hans Peter & Engelmann, Dirk, 2013. "Tailored Bayesian Mechanisms: Experimental Evidence from Two-Stage Voting Games," CEPR Discussion Papers 9544, C.E.P.R. Discussion Papers.
    7. Takashi Kunimoto & Cuiling Zhang, 2021. "On incentive compatible, individually rational public good provision mechanisms," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 431-468, August.
    8. Daske, Thomas, 2019. "Efficient Incentives in Social Networks: "Gamification" and the Coase Theorem," EconStor Preprints 193148, ZBW - Leibniz Information Centre for Economics.
    9. Kiho Yoon, 2020. "Bilateral trading with contingent contracts," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 445-461, June.
    10. Hoffmann, Timo & Renes, Sander, 2016. "Flip a coin or vote: An Experiment on Choosing Group Decision Rules," VfS Annual Conference 2016 (Augsburg): Demographic Change 145474, Verein für Socialpolitik / German Economic Association.
    11. Arijit Sen, 2017. "Symmetry in Bargaining and Efficient Contracts under Asymmetric Information," Studies in Microeconomics, , vol. 5(2), pages 132-142, December.
    12. Simon Loertscher & Leslie M. Marx, 2022. "Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration," American Economic Review, American Economic Association, vol. 112(2), pages 616-649, February.
    13. Alexander Teytelboym, 2019. "Natural capital market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(1), pages 138-161.
    14. Andrzej Skrzypacz & Juuso Toikka, 2015. "Mechanisms for Repeated Trade," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 252-293, November.
    15. Bergemann, Dirk & Brooks, Benjamin & Morris, Stephen, 2020. "Countering the winner's curse: optimal auction design in a common value model," Theoretical Economics, Econometric Society, vol. 15(4), November.
    16. Bumin Yenmez, M., 2012. "Dissolving multi-partnerships efficiently," Journal of Mathematical Economics, Elsevier, vol. 48(2), pages 77-82.
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    18. Timo Hoffmann & Sander Renes, 2022. "Flip a coin or vote? An experiment on the implementation and efficiency of social choice mechanisms," Experimental Economics, Springer;Economic Science Association, vol. 25(2), pages 624-655, April.
    19. Hao Zhang, 2012. "Analysis of a Dynamic Adverse Selection Model with Asymptotic Efficiency," Mathematics of Operations Research, INFORMS, vol. 37(3), pages 450-474, August.

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    More about this item

    Keywords

    Efficient property rights; asymmetric information bargaining; transaction costs;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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