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Strategy-proof market clearing mechanisms

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Consider a market for a resource under disequilibrium prices where suppliers and demanders are privately informed about their optimal supply and consumption levels. Strategy-proof market clearing mechanisms give suppliers and demanders dominant strategy incentives to truthfully reveal this information. We describe the class of strategy-proof and efficient mechanisms responding well to changes in supplies and demands, as formalized by the "replacement principle" (Thomson, 2007). Since no symmetry or anonymity conditions are imposed, these mechanisms can implement a wide array of distributional objectives in both indivisible and divisible resource allocation situations. These mechanisms apply to allocation problems involving network constraints modeling necessary conditions for a transfer of the resource from a supplier to a demander.

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  • Szwagrzak, Karol, 2014. "Strategy-proof market clearing mechanisms," Discussion Papers of Business and Economics 4/2014, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2014_004
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    1. Thomson, William, 1997. "The Replacement Principle in Economies with Single-Peaked Preferences," Journal of Economic Theory, Elsevier, vol. 76(1), pages 145-168, September.
    2. Bochet, Olivier & Ilkilic, Rahmi & Moulin, Hervé & Sethuraman, Jay, 2012. "Balancing supply and demand under bilateral constraints," Theoretical Economics, Econometric Society, vol. 7(3), September.
    3. Bochet, Olivier & İlkılıç, Rahmi & Moulin, Hervé, 2013. "Egalitarianism under earmark constraints," Journal of Economic Theory, Elsevier, vol. 148(2), pages 535-562.
    4. Hervé Moulin, 1987. "The Pure Compensation Problem: Egalitarianism Versus Laissez-Fairism," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 769-783.
    5. Barbera, Salvador & Jackson, Matthew O. & Neme, Alejandro, 1997. "Strategy-Proof Allotment Rules," Games and Economic Behavior, Elsevier, vol. 18(1), pages 1-21, January.
    6. Thomson, William, 2003. "Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: a survey," Mathematical Social Sciences, Elsevier, vol. 45(3), pages 249-297, July.
    7. Mark A. Satterthwaite & Hugo Sonnenschein, 1981. "Strategy-Proof Allocation Mechanisms at Differentiable Points," Review of Economic Studies, Oxford University Press, vol. 48(4), pages 587-597.
    8. Özgür Kıbrıs & Serkan Küçükşenel, 2009. "Uniform trade rules for uncleared markets," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 32(1), pages 101-121, January.
    9. Anna Bogomolnaia & Herve Moulin, 2004. "Random Matching Under Dichotomous Preferences," Econometrica, Econometric Society, vol. 72(1), pages 257-279, January.
    10. Masso, Jordi & Neme, Alejandro, 2007. "Bribe-proof rules in the division problem," Games and Economic Behavior, Elsevier, vol. 61(2), pages 331-343, November.
    11. William Thomson, 2007. "Fair Allocation Rules," RCER Working Papers 539, University of Rochester - Center for Economic Research (RCER).
    12. William Thomson, 1999. "Welfare-domination under preference-replacement: A survey and open questions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 16(3), pages 373-394.
    13. Lensberg, Terje, 1987. "Stability and Collective Rationality," Econometrica, Econometric Society, vol. 55(4), pages 935-961, July.
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    More about this item

    Keywords

    Strategy-proofness; Replacement principle; Network constraints; Indivisible resourcces;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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