Truthful Bilateral Trade is Impossible even with Fixed Prices

Abstract: A seminal theorem of Myerson and Satterthwaite (1983) proves that, in a game of bilateral trade between a single buyer and a single seller, no mechanism can be simultaneously individually-rational, budget-balanced, incentive-compatible and socially-efficient. However, the impossibility disappears if the price is fixed exogenously and the social-efficiency goal is subject to individual-rationality at the given price. We show that the impossibility comes back if there are multiple units of the same good, or multiple types of goods, even when the prices are fixed exogenously. Particularly, if there are $M$ units of the same good or $M$ kinds of goods, for some $M\geq 2$, then no truthful mechanism can guarantee more than $1/M$ of the optimal gain-from-trade. In the single-good multi-unit case, if both agents have submodular valuations (decreasing marginal returns), then no truthful mechanism can guarantee more than $1/H_M$ of the optimal gain-from-trade, where $H_M$ is the $M$-th harmonic number ($H_M\approx \ln{M}+1/2$). All upper bounds are tight.