MUDA: A Truthful Multi-Unit Double-Auction Mechanism

TL;DR

This paper introduces MUDA, a truthful, multi-unit double-auction mechanism that extends McAfee's single-unit approach to handle multi-parametric agents with decreasing marginal returns, ensuring efficiency and truthfulness.

Contribution

It develops a new mechanism for multi-unit double auctions that is prior-free, ex-post individually rational, dominant-strategy truthful, and applicable to agents with decreasing marginal returns.

Findings

Mechanism approaches optimal gain-from-trade in large markets.

Ensures truthfulness and individual rationality for multi-unit traders.

Maintains strong budget balance across diverse market sizes.

Abstract

In a seminal paper, McAfee (1992) presented a truthful mechanism for double auctions, attaining asymptotically-optimal gain-from-trade without any prior information on the valuations of the traders. McAfee's mechanism handles single-parametric agents, allowing each seller to sell a single unit and each buyer to buy a single unit. This paper presents a double-auction mechanism that handles multi-parametric agents and allows multiple units per trader, as long as the valuation functions of all traders have decreasing marginal returns. The mechanism is prior-free, ex-post individually-rational, dominant-strategy truthful and strongly-budget-balanced. Its gain-from-trade approaches the optimum when the market size is sufficiently large.