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A Dominant Strategy, Double Clock Auction with Estimation-Based Tatonnement

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  • Loertscher, Simon

    (University of Melbourne)

  • Mezzetti, Claudio

    (University of Queensland & University of Warwick)

Abstract

The price mechanism is fundamental to economics but difficult to reconcile with incentive compatibility and individual rationality. We introduce a double clock auction for a homogeneous good market with multi-dimensional private information and multi-unit traders that is deficit-free, ex post individually rational, constrained efficient, and makes sincere bidding a dominant strategy equilibrium. Under a weak dependence and an identifiability condition, our double clock auction is also asymptotically efficient. Asymptotic efficiency is achieved by estimating demand and supply using information from the bids of traders that have dropped out and following a tatonnement process that adjusts the clock prices based on the estimates.

Suggested Citation

  • Loertscher, Simon & Mezzetti, Claudio, 2020. "A Dominant Strategy, Double Clock Auction with Estimation-Based Tatonnement," The Warwick Economics Research Paper Series (TWERPS) 1249, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1249
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    More about this item

    Keywords

    Deficit free ; dominant strategy mechanisms ; double clock auctions ; individual rationality ; multi-dimensional types ; privacy preservation ; reserve prices ; VCG mechanism JEL codes: C72 ; D44 ; D47 ; D82;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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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