Direct Fractional Auction

TL;DR

This paper introduces the Direct Fractional Auction (DFA), an efficient market mechanism for fractional ownership of indivisible assets, enabling small and large investors to participate and optimizing seller value.

Contribution

It presents the DFA algorithm for fractional ownership auctions, including procedures for optimal bidder selection and complexity reduction techniques.

Findings

DFA outperforms Greedy algorithm in maximizing seller value

DFA effectively transfers partial ownership to winners

Pruning method reduces problem complexity

Abstract

This paper designs a market algorithm for fractional ownership of an indivisible asset. It provides an efficient market mechanism, named Direct Fractional Auction (DFA) that offers valuable assets to both small and large investors who can become partial owners of such assets. Additionally, it introduces procedures and algorithms with DFA to determine the optimal winning combinations of unaffiliated bidders. DFA, on the one hand, transfers the partial ownership to the winners and, on the other, redirects the proceeds from the auctions to the sellers. We show that the DFA algorithm works more efficiently than the Greedy algorithm in maximizing the seller's value. We also demonstrate the possibility of reducing the complexity of the problem using the "pruning" method for data pre-processing.