Strongly Budget Balanced Auctions for Multi-Sided Markets

TL;DR

This paper extends strongly-budget-balanced auction mechanisms from two-sided markets to complex multi-sided markets, introducing new concepts of competition and trade reduction, with an implementation that ensures truthfulness.

Contribution

It generalizes existing two-sided auction models to multi-sided markets, incorporating external competition and trade reduction, and provides an obviously-truthful ascending price implementation.

Findings

Successfully generalized auction mechanisms to multi-sided markets.

Introduced the concepts of external competition and trade reduction.

Provided an implementation ensuring obvious truthfulness.

Abstract

In two-sided markets, Myerson and Satterthwaite's impossibility theorem states that one can not maximize the gain-from-trade while also satisfying truthfulness, individual-rationality and no deficit. Attempts have been made to circumvent Myerson and Satterthwaite's result by attaining approximately-maximum gain-from-trade: the double-sided auctions of McAfee (1992) is truthful and has no deficit, and the one by Segal-Halevi et al. (2016) additionally has no surplus --- it is strongly-budget-balanced. They consider two categories of agents --- buyers and sellers, where each trade set is composed of a single buyer and a single seller. The practical complexity of applications such as supply chain require one to look beyond two-sided markets. Common requirements are for: buyers trading with multiple sellers of different or identical items, buyers trading with sellers through transporters and mediators, and sellers trading with multiple buyers. We attempt to address these settings. We generalize Segal-Halevi et al. (2016)'s strongly-budget-balanced double-sided auction setting to a multilateral market where each trade set is composed of any number of agent categories. Our generalization refines the notion of competition in multi-sided auctions by introducing the concepts of external competition and trade reduction. We also show an obviously-truthful implementation of our auction using multiple ascending prices.