Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96889
Authors: 
Bierbrauer, Felix
Ockenfels, Axel
Pollak, Andreas
Rückert, Désirée
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4713
Abstract: 
We study a classic mechanism design problem: How to organize trade between two privately informed parties. We characterize an optimal mechanism under selfish preferences and present experimental evidence that, under such a mechanism, a non-negligible fraction of individuals deviates from the intended behavior. We show that this can be explained by models of social preferences and introduce the notion of a social-preference-robust mechanism. We characterize an optimal mechanism in this class and present experimental evidence that it successfully controls behavior. We finally show that this mechanism is more profitable only if deviations from selfish behavior are sufficiently frequent.
Subjects: 
robust mechanism design
social preferences
bilateral trade
JEL: 
C92
D03
D82
Document Type: 
Working Paper

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