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A Simple Status Quo that Ensures Participation (with Application to Efficient Bargaining)

21 Pages Posted: 12 Jan 2009 Last revised: 25 Mar 2010

Ilya R. Segal

Stanford University

Michael D. Whinston

Sloan School of Management and Department of Economics

Date Written: March 16, 2010

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 has the expected efficient decision provided that the total surplus is convex in the decision.

Suggested Citation

Segal, Ilya R. and Whinston, Michael D., A Simple Status Quo that Ensures Participation (with Application to Efficient Bargaining) (March 16, 2010). Available at SSRN: https://ssrn.com/abstract=1325524 or http://dx.doi.org/10.2139/ssrn.1325524

Ilya Segal (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States
650-724-4905 (Phone)
650-725-5702 (Fax)

Michael D. Whinston

Sloan School of Management and Department of Economics ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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