The sealed-bid mechanism for bargaining with incomplete information.

A buyer and a seller bargain over the price of a single object. Each bargainer knows his own "type" (i.e., the true value of the object to him), but has only probabilistic information about the other's type. The bargaining procedure used is the sealed-bid mechanism, which is known to have a certain efficiency property. (In this mechanism, the two players bid simultaneously. Trade takes place if and only if the buyer's bid is at least as great as the seller's, and at a price halfway between the two. A strategy is a rule giving the player's bid as a function of his true value.)