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Truthful Double Auction Mechanisms

Author

Listed:
  • Leon Yang Chu

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

  • Zuo-Jun Max Shen

    (Department of Industrial Engineering and Operations Research, University of California, Berkeley, California 94720)

Abstract

Following the multistage design approach, we propose two asymptotically efficient truthful double auction mechanisms, the BC-LP mechanism and the MBC mechanism, for an exchange market with many buyers and sellers. In this market, each buyer wants to procure a bundle of commodities and each seller supplies one unit of a commodity. Furthermore, various transaction-related costs will be incurred when a buyer trades with a seller. We prove that under both mechanisms, truthful bidding is a dominant strategy for all buyers and sellers when the buyers' bundle information and the transaction cost information are common knowledge. The BC-LP mechanism can be implemented by just solving two linear programs, whereas the MBC mechanism has a higher complexity. The empirical study shows that the MBC mechanism achieves higher efficiency over the BC-LP mechanism and that both outperform the KSM-TR mechanism, the only known truthful mechanism for a more restrictive exchange market.

Suggested Citation

  • Leon Yang Chu & Zuo-Jun Max Shen, 2008. "Truthful Double Auction Mechanisms," Operations Research, INFORMS, vol. 56(1), pages 102-120, February.
    • Handle: RePEc:inm:oropre:v:56:y:2008:i:1:p:102-120
    DOI: 10.1287/opre.1070.0458
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    References listed on IDEAS

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    Cited by:

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    5. Liang, Renchao & Wang, Junwei & Huang, Min & Jiang, Zhong-Zhong, 2020. "Truthful auctions for e-market logistics services procurement with quantity discounts," Transportation Research Part B: Methodological, Elsevier, vol. 133(C), pages 165-180.
    6. Cheng, Meng & Xu, Su Xiu & Huang, George Q., 2016. "Truthful multi-unit multi-attribute double auctions for perishable supply chain trading," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 21-37.
    7. Yiting Xing & Ling Li & Zhuming Bi & Marzena Wilamowska‐Korsak & Li Zhang, 2013. "Operations Research (OR) in Service Industries: A Comprehensive Review," Systems Research and Behavioral Science, Wiley Blackwell, vol. 30(3), pages 300-353, May.
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    9. Ying-Ju Chen, 2011. "Optimal Selling Scheme for Heterogeneous Consumers with Uncertain Valuations," Mathematics of Operations Research, INFORMS, vol. 36(4), pages 695-720, November.
    10. Sun, Jiasen & Li, Guo & Xu, Su Xiu & Dai, Wei, 2019. "Intermodal transportation service procurement with transaction costs under belt and road initiative," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 31-48.
    11. Yu, Hao & Huang, Min & Chao, Xiuli & Yue, Xiaohang, 2022. "Truthful multi-attribute multi-unit double auctions for B2B e-commerce logistics service transactions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    12. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E. & Zhao, Shouting, 2022. "Truthful double auction mechanisms for online freight platforms with transaction costs," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 164-186.
    13. Cem Ozturk, O. & Karabatı, Selçuk, 2017. "A decision support framework for evaluating revenue performance in sequential purchase contexts," European Journal of Operational Research, Elsevier, vol. 263(3), pages 922-934.
    14. Xu, Su Xiu & Cheng, Meng & Huang, George Q., 2015. "Efficient intermodal transportation auctions for B2B e-commerce logistics with transaction costs," Transportation Research Part B: Methodological, Elsevier, vol. 80(C), pages 322-337.
    15. Huang, George Q. & Xu, Su Xiu, 2013. "Truthful multi-unit transportation procurement auctions for logistics e-marketplaces," Transportation Research Part B: Methodological, Elsevier, vol. 47(C), pages 127-148.
    16. Bin Hu & Anyan Qi, 2018. "Optimal Procurement Mechanisms for Assembly," Manufacturing & Service Operations Management, INFORMS, vol. 20(4), pages 655-666, October.
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    18. Jorge Barrera & Alfredo Garcia, 2015. "Auction Design for the Efficient Allocation of Service Capacity Under Congestion," Operations Research, INFORMS, vol. 63(1), pages 151-165, February.

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