Balanced Trade Reduction for Dual-Role Exchange Markets

We consider dual-role exchange markets, where traders can offer to both buy and sell the same commodity in the exchange but, if they transact, they can only be either a buyer or a seller, which is determined by the market mechanism. To design desirable mechanisms for such exchanges, we show that existing solutions may not be incentive compatible, and more importantly, cause the market maker to suffer a significant deficit. Hence, to combat this problem, following McAfee's trade reduction approach, we propose a new trade reduction mechanism, called balanced trade reduction, that is incentive compatible and also provides flexible trade-offs between efficiency and deficit.

[1]  Mark Klein,et al.  Auctions and bidding: A guide for computer scientists , 2011, CSUR.

[2]  David C. Parkes,et al.  Achieving Budget-Balance with Vickrey-Based Payment Schemes in Exchanges , 2001, IJCAI.

[3]  Sekyung Han,et al.  Development of an Optimal Vehicle-to-Grid Aggregator for Frequency Regulation , 2010, IEEE Transactions on Smart Grid.

[4]  Rica Gonen,et al.  Generalized trade reduction mechanisms , 2007, EC '07.

[5]  D. Parkes Algorithmic Game Theory: Online Mechanisms , 2007 .

[6]  Avrim Blum,et al.  Online algorithms for market clearing , 2002, SODA '02.

[7]  Moshe Babaioff,et al.  Incentive-compatible, budget-balanced, yet highly efficient auctions for supply chain formation , 2003, EC '03.

[8]  Makoto Yokoo,et al.  Incentives in ridesharing with deficit control , 2014, AAMAS.

[9]  Eric Horvitz,et al.  Collaboration and shared plans in the open world: studies of ridesharing , 2009, IJCAI 2009.

[10]  R. McAfee,et al.  A dominant strategy double auction , 1992 .

[11]  M. Satterthwaite,et al.  Efficient Mechanisms for Bilateral Trading , 1983 .

[12]  Moshe Babaioff,et al.  Mechanisms for a spatially distributed market , 2004, EC '04.

[13]  Michael P. Wellman,et al.  Flexible double auctions for electronic commerce: theory and implementation , 1998, Decis. Support Syst..

[14]  Willett Kempton,et al.  Vehicle-to-grid power fundamentals: Calculating capacity and net revenue , 2005 .

[15]  David C. Parkes,et al.  Chain: A Dynamic Double Auction Framework for Matching Patient Agents , 2007, J. Artif. Intell. Res..