(Almost) Efficient Mechanisms for Bilateral Trading

TL;DR

This paper develops simple, robust mechanisms for bilateral trade that achieve approximate efficiency and incentive compatibility, leveraging minimal data and enabling extensions to more complex settings.

Contribution

It introduces mechanisms that approximate efficiency in bilateral trade with incentive compatibility and minimal data use, and shows how to extend these to broader environments.

Findings

Mechanisms achieve near-optimal efficiency

Minimal statistical data improves approximation

Framework extends to complex trading environments

Abstract

We study the bilateral trade problem: one seller, one buyer and a single, indivisible item for sale. It is well known that there is no fully-efficient and incentive compatible mechanism for this problem that maintains a balanced budget. We design simple and robust mechanisms that obtain approximate efficiency with these properties. We show that even minimal use of statistical data can yield good approximation results. Finally, we demonstrate how a mechanism for this simple bilateral-trade problem can be used as a "black-box" for constructing mechanisms in more general environments.