Show that under the given rule do not have an incentive

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Reference no: EM132144259

Question: Imagine a seller and a buyer is trading. The buyer's value is v while the production cost is c. Both v and c take some values in between of 0 and 1. The exact v (resp. c) is privately known to the buyer (resp. the seller). One can apply VCG mechanism here. There, both the seller and buyer announces c and v. If announced v and c satisfy v = c (that is, trade is efficient), then trade occurs. The seller gets v while the buyer pays c (think why). Show that under this rule, both parties do not have an incentive to lie.

Reference no: EM132144259

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