Budget-balanced mechanism

Weak budget balance is considered a necessary requirement for the economic feasibility of a mechanism.

A simple example of a WBB mechanism is the Vickrey auction, in which the operator wants to sell an object to one of n potential buyers.

In fact, the Myerson–Satterthwaite theorem says that every Pareto-efficient truthful mechanism must incur a deficit.

[4][5] An advantage of SBB is that all the gain from trade remains in the market; thus, the long-term welfare of the traders is larger and their tendency to participate may be higher.

Since the payment goes directly from the buyer to the seller, the mechanism is SBB; however, it is not truthful, since the buyer can gain by bidding b' < b and the seller can gain by bidding s' > s. Recently, some truthful SBB mechanisms for double auction have been developed.