The Myerson-Satterthwaite Theorem states that no mechanism for negotiating a trade between a single buyer and a single seller, each with private information about their own valuation, can simultaneously be efficient, individually rational for both parties, and budget-balanced. Proved by Roger Myerson and Mark Satterthwaite, it is a central impossibility result in the economic theory of mechanism design, showing that private information imposes an unavoidable cost on bilateral trade.
Facts
StatementThere is no efficient way for two parties to trade a good when each has secret, probabilistically varying valuations for it, without the risk of forcing one party to trade at a loss. 1 Classification
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Source Myerson-Satterthwaite theorem (Wikipedia)
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1. Myerson-Satterthwaite theorem (Wikipedia)
Opening paragraph
there is no efficient way for two parties to trade a good when they each have secret and probabilistically varying valuations for it, without the risk of forcing one party to trade at a loss.
Proved By: Mark Satterthwaite, Lead
named for Roger Myerson and Mark Satterthwaite
In Group: Mechanism Design, Lead paragraph
The Myerson-Satterthwaite theorem is an important result in mechanism design and the economics of asymmetric information, and named for Roger Myerson and Mark Satterthwaite.
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