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<p>Subsidies in business transactions constitute a major role in the economic development of a nation. Subsidy providers such as governments shall seek to achieve certain outcomes of the trade which they support while also trying to optimize the subsidy which they provide. In this research, we design a mechanism in a two-player bargaining framework which achieves certain desired properties of trade. More specifically, in an environment of information asymmetry about the players’ valuations, we develop an incentive compatible, ex-post efficient, and ex-post individually rational mechanism by extending the work of Myerson and Sattherthwaite (J Econ Theory 29(2):265–281, 1983). The minimum outside subsidy required to achieve these properties is also derived. We illustrate the mechanism through numerical examples.</p>

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Two player bargaining model with outside subsidy

  • 期刊论文

  • 发表日期：

    2025年6月2日

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  • Ranjeet Rajput,
  • Sri Vanamalla Venkataraman

摘要

Subsidies in business transactions constitute a major role in the economic development of a nation. Subsidy providers such as governments shall seek to achieve certain outcomes of the trade which they support while also trying to optimize the subsidy which they provide. In this research, we design a mechanism in a two-player bargaining framework which achieves certain desired properties of trade. More specifically, in an environment of information asymmetry about the players’ valuations, we develop an incentive compatible, ex-post efficient, and ex-post individually rational mechanism by extending the work of Myerson and Sattherthwaite (J Econ Theory 29(2):265–281, 1983). The minimum outside subsidy required to achieve these properties is also derived. We illustrate the mechanism through numerical examples.