Skip to main content
SpringerLink
Log in

Double auctions with no-loss constrained traders

  • Published:
Theory and Decision Aims and scope Submit manuscript

Abstract

Do hard budget constraints work in favour or against truth telling in double auctions? McAfee (1992) constructed a simple double auction mechanism (MDA), which is strategyproof and minimally inefficient, but may resort to dual prices, where the difference between prices is channelled as a surplus to the market maker, preventing MDA from achieving a balanced budget. We construct a variant of MDA in which no-loss constraints play a major positive role. Our variant of MDA is also strategyproof, as efficient as MDA but improves on it by achieving a balanced budget via always having a uniform price.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Matters get more complex with multiunit demands and supplies [as in Loertscher and Mezzetti (2014)] or with interdependent values [as in Kojima and Yamashita (2014)]. For an excellent survey on the design of two-sided markets, see Loertscher et al. (2015).

  2. We are thankful to Preston McAfee for sharing this observation with us. As in a world with NLC traders, MDA maintains all its properties, it follows that in such a world our mechanism is more efficient than MDA in ex-ante sense if welfare is utilitarian. However, as explained in Sect. 4, our mechanism ceases to be strategyproof in a world where traders are not NLC.

  3. As pointed out by a referee, there are many implementations in experiments of private-values markets in which bidding above value or below cost was ruled out by the decision interface.

  4. We thank an anonymous referee for suggesting this to us.

References

  • Clarke, E. (1971). Multipart pricing of public goods. Public Choice, 11(1), 17–33.

    Article  Google Scholar 

  • Chatterjee, K., & Samuelson, W. (1983). Bargaining under incomplete information. Operations Research, 31, 835–851.

    Article  Google Scholar 

  • Groves, T. (1973). Incentives in teams. Econometrica, 41(4), 617–631.

    Article  Google Scholar 

  • Kojima, F., & Yamashita, T. (2014). Double auction with interdependent values: Incentives and efficiency. Theoretical Economics (forthcoming).

  • Loertscher, S., & Mezzetti, C. (2014). A dominant strategy double auction with multi-unit traders. Working paper, University of Melbourne.

  • Loertscher, S., & Mezzetti, C. (2016). Dominant strategy, double clock auctions with estimation-based tatonnement. Melbourne: Mimeo, University of Melbourne.

    Google Scholar 

  • Loertscher, S., Marx, L., & Wilkening, T. (2015). A long way coming: Designing centralised markets with privately informed buyers and sellers. Journal of Economic Literature, 53(4), 857–897.

    Article  Google Scholar 

  • McAfee, P. (1992). A dominant strategy double auction. Journal of Economic Theory, 56, 434–450.

    Article  Google Scholar 

  • Myerson, R., & Satterthwaite, M. (1983). Efficient mechanisms for bilateral trading. Journal of Economic Theory, 29(2), 265–281.

    Article  Google Scholar 

  • Vickrey, W. (1965). Counterspeculation, auction, and competitive sealed tenders. Journal of Finance, 16, 8–37.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Deakin University, Burwood, VIC, 3128, Australia

    Nejat Anbarci

  2. Department of Economics, University of Bath, Claverton Down, Bath, BA2 7AY, UK

    Jaideep Roy

Authors
  1. Nejat Anbarci
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jaideep Roy
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jaideep Roy.

Additional information

We thank Sandro Brusco, Nick Feltovich, Takashi Kunimoto, Simon Loertscher, Preston McAfee, Arunava Sen, Steven Williams and two anonymous referees for useful comments and suggestions.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Anbarci, N., Roy, J. Double auctions with no-loss constrained traders. Theory Decis 84, 1–9 (2018). https://doi.org/10.1007/s11238-017-9627-7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11238-017-9627-7

Keywords

Search

Navigation