Robust double auction mechanisms

TL;DR

This paper characterizes robust double auction mechanisms, showing that under certain assumptions, the only viable mechanism is a generalized posted price mechanism with a constant price, independent of players' valuations.

Contribution

It provides a complete characterization of robust double auction mechanisms, proving that under non-bossiness and other conditions, only generalized posted price mechanisms are feasible.

Findings

Price in robust mechanisms is valuation-independent.

Under non-bossiness, prices do not depend on any players' valuations.

Generalized posted price mechanisms are essentially the only robust mechanisms under given assumptions.

Abstract

We study the robust double auction mechanisms, that is, the double auction mechanisms that satisfy dominant strategy incentive compatibility, ex-post individual rationality and ex-post budget balance. We first establish that the price in any robust mechanism does not depend on the valuations of the trading players. We next establish that, with a non-bossiness assumption, the price in any robust mechanism does not depend on players' valuations at all, whether trading or non-trading. Our main result is the characterization result that, with a non-bossy assumption along with other assumptions on the properties of the mechanism, the generalized posted mechanism in which a constant price is posted for each possible set of traders is the only robust double auction mechanism. We also show that, even without the non-bossiness assumption, it is quite difficult to find a reasonable robust double auction mechanism other than the generalized posted price mechanism.