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Double auction with interdependent values: incentives and efficiency

Author

Listed:
  • Kojima, Fuhito

    () (Department of Economics, Stanford University)

  • Yamashita, Takuro

    () (Toulouse School of Economics, University of Toulouse Capitole)

Abstract

We study a double auction environment where buyers and sellers have inter-dependent valuations and multiunit demand and supply. We propose a new mechanism, the groupwise-price mechanism. We show that the mechanism satisfies ex post incentive compatibility, individual rationality, feasibility, non-wastefulness, and no budget deficit. Moreover, the mechanism is asymptotically efficient in that the trade outcome in the mechanism converges to the efficient level as in a competitive equilibrium as the numbers of the buyers and sellers become large. Our groupwise-price mechanism is the first double auction mechanism with these properties in the interdependent values setting.

Suggested Citation

  • Kojima, Fuhito & Yamashita, Takuro, 2017. "Double auction with interdependent values: incentives and efficiency," Theoretical Economics, Econometric Society, vol. 12(3), September.
  • Handle: RePEc:the:publsh:2275
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    References listed on IDEAS

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    1. Cordoba, Jose M. & Hammond, Peter J., 1998. "Asymptotically strategy-proof Walrasian exchange," Mathematical Social Sciences, Elsevier, vol. 36(3), pages 185-212, December.
    2. Matsushima, Hitoshi, 2008. "Detail-free mechanism design in twice iterative dominance: Large economies," Journal of Economic Theory, Elsevier, vol. 141(1), pages 134-151, July.
    3. Steven R. Williams, 1999. "A characterization of efficient, bayesian incentive compatible mechanisms," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(1), pages 155-180.
    4. Philippe Jehiel & Moritz Meyer-ter-Vehn & Benny Moldovanu & William R. Zame, 2006. "The Limits of ex post Implementation," Econometrica, Econometric Society, vol. 74(3), pages 585-610, May.
    5. Kovalenkov, Alexander, 2002. "Simple Strategy-Proof Approximately Walrasian Mechanisms," Journal of Economic Theory, Elsevier, vol. 103(2), pages 475-487, April.
    6. McAfee, R. Preston, 1992. "A dominant strategy double auction," Journal of Economic Theory, Elsevier, vol. 56(2), pages 434-450, April.
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    More about this item

    Keywords

    Double auction; interdependent values; multi-unit demand and supply; ex post incentive compatibility; asymptotic efficiency;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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