TY - JOUR
T1 - Modularity and greed in double auctions
AU - Dütting, Paul
AU - Talgam-Cohen, Inbal
AU - Roughgarden, Tim
N1 - Publisher Copyright:
© 2017
PY - 2017/9
Y1 - 2017/9
N2 - Designing double auctions is a complex problem, especially when there are restrictions on the sets of buyers and sellers that may trade with one another. The goal of this paper is to develop a modular approach to the design of double auctions, by relating it to the exhaustively-studied problem of designing one-sided mechanisms with a single seller (or, alternatively, a single buyer). We consider several desirable properties of a double auction: feasibility, dominant-strategy incentive compatibility, the still stronger incentive constraints offered by a deferred-acceptance implementation, exact and approximate welfare maximization, and budget balance. For each of these properties, we identify sufficient conditions on two one-sided algorithms—one for ranking the buyers, one for ranking the sellers—and on a method for their composition into trading pairs, which guarantee the desired property of the double auction. Our framework also offers new insights into classic double auction designs, such as the VCG and McAfee auctions with unit-demand buyers and unit-supply sellers.
AB - Designing double auctions is a complex problem, especially when there are restrictions on the sets of buyers and sellers that may trade with one another. The goal of this paper is to develop a modular approach to the design of double auctions, by relating it to the exhaustively-studied problem of designing one-sided mechanisms with a single seller (or, alternatively, a single buyer). We consider several desirable properties of a double auction: feasibility, dominant-strategy incentive compatibility, the still stronger incentive constraints offered by a deferred-acceptance implementation, exact and approximate welfare maximization, and budget balance. For each of these properties, we identify sufficient conditions on two one-sided algorithms—one for ranking the buyers, one for ranking the sellers—and on a method for their composition into trading pairs, which guarantee the desired property of the double auction. Our framework also offers new insights into classic double auction designs, such as the VCG and McAfee auctions with unit-demand buyers and unit-supply sellers.
KW - Deferred-acceptance auctions
KW - Double auctions
KW - Mechanism design
KW - Trade reduction mechanism
UR - http://www.scopus.com/inward/record.url?scp=85026672159&partnerID=8YFLogxK
U2 - 10.1016/j.geb.2017.06.008
DO - 10.1016/j.geb.2017.06.008
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AN - SCOPUS:85026672159
SN - 0899-8256
VL - 105
SP - 59
EP - 83
JO - Games and Economic Behavior
JF - Games and Economic Behavior
ER -