(Almost) Efficient Mechanisms for Bilateral Trading

We study the simplest form of two-sided markets: one seller, one buyer and a single item for sale. It is well known that there is no fully-efficient mechanism for this problem that maintains a balanced budget. We characterize the quality of the most efficient mechanisms that are budget balanced, and design simple and robust mechanisms with these properties. We also show that even minimal use of statistical data can yield good 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.