Efficient Trading Mechanisms with Pre-Play Communication

Abstract

This paper studies the problem of designing efficient trading mechanisms when players may engage in pre-play communication. It is well known that equilibrium behavior can be affected, sometimes drastically, if players have the opportunity to exchange messages prior to playing some particular game. We investigate the relationship between efficiency, pre-play communication, and unique implementation. We identify a class of simple mechanisms which are immune to pre-play communication and show that any incentive efficient allocation can be uniquely implemented by such a mechanism.