Nice! The standard method would be the BDM mechanism, and what’s neat is that it works even if people aren’t risk-neutral in money. Here’s the idea.
Have people report their disvalue Y. Independently draw a number z at random, e.g. from an exponential distribution with expectation 1/λ=X. Then offer to pay them z iff z≥Y.
Now it’s a dominant strategy to report your disvalue truthfully: reporting above your disvalue can never raise what you’re offered but it can risk eliminating a profitable trade, while reporting below it either makes no difference or gives you an offer you wouldn’t want to take.
This is the exact same logic behind the second-price auction.
Nice! The standard method would be the BDM mechanism, and what’s neat is that it works even if people aren’t risk-neutral in money. Here’s the idea.
Have people report their disvalue Y. Independently draw a number z at random, e.g. from an exponential distribution with expectation 1/λ=X. Then offer to pay them z iff z≥Y.
Now it’s a dominant strategy to report your disvalue truthfully: reporting above your disvalue can never raise what you’re offered but it can risk eliminating a profitable trade, while reporting below it either makes no difference or gives you an offer you wouldn’t want to take.
This is the exact same logic behind the second-price auction.