The Exact Approximation Ratio of the Optimal Fixed-Price Mechanism in Bilateral Trade

Abstract

Prior work placed the worst-case welfare ratio of the optimal fixed-price mechanism for bilateral trade in the interval [0.7292,0.73805]. We determine the ratio exactly as \[ \alpha_{\mathrm{FP}}=0.7380243357\ldots, \] characterized by the unique root of an explicit one-dimensional equation. The proof first saturates a Wronskian constraint on the seller put and buyer call transforms. In inverse-call coordinates, the resulting extremal problem becomes a control problem whose logarithmic formulation is strictly convex. Its optimizer has one interior arc followed by the boundary \(q=1\), and the trajectory can be integrated explicitly. We then realize this optimizer by a bounded seller and buyer body together with a vanishing buyer mass at an escaping value, obtaining a matching limiting family. Every fixed instance admits an optimal price, but the worst-case distributional infimum is not attained. The proof applies to arbitrary Borel distributions with finite first moment, including atomic and unbounded distributions.