Subjective reservation values cannot be credibly communicated even when honest

Evidence

Von Neumann and Morgenstern illustrated their solution concept for the nonzero-sum game with the example of a seller, A, prepared to sell his house for any price above 10, and two buyers, B and C, prepared to pay up to 15 and 25, respectively. {58} (My numbers.) The novel part of the solution was that C might pay B a share of his saving if, through B’s staying out of the market, C got the house for less than 15. They proposed—and this limitation was inherent in their concept of solution—that the most B might receive from C was 15 – 10 = 5. What is interesting about the information requirement of this solution is not that B’s reservation price of 15 is something that he might try to misrepresent, but that in the ordinary world he could not convincingly communicate the truth if he wanted to. — Thomas C. Schelling, The Strategy of Conflict, 280

Categorization

• XREF: The speculation restriction shows why third parties can’t enter enforcement arrangements without the right to the asset itself — a constraint the Mafia’s coercion-circumvents. — connects to: Some preferences are inherently unknowable even when their owner is desperate to reveal them — Thomas C. Schelling, The Strategy of Conflict, 278; Value systems of different kinds of people resist introspective estimation — Thomas C. Schelling, The Strategy of Conflict, 281; Communication succeeds only through shared contextual beliefs that cannot be fully formalized

Broader Connections

• Value systems of different kinds of people resist introspective estimation #expands (0.78) — Thomas C. Schelling, The Strategy of Conflict, 281
• Communication succeeds only through shared contextual beliefs that cannot be fully formalized #corroborates (0.72)