TY - GEN
T1 - Fast convergence in the double oral auction
AU - Assadi, Sepehr
AU - Khanna, Sanjeev
AU - Li, Yang
AU - Vohra, Rakesh
N1 - Funding Information: The full version of this paper can be found in []. Supported in part by National Science Foundation grants CCF-1116961, CCF-1552909, and IIS-1447470. Publisher Copyright: © Springer-Verlag Berlin Heidelberg 2015.
PY - 2015
Y1 - 2015
N2 - A classical trading experiment consists of a set of unit demand buyers and unit supply sellers with identical items. Each agent’s value or opportunity cost for the item is their private information and preferences are quasi-linear. Trade between agents employs a double oral auction (DOA) in which both buyers and sellers call out bids or offers which an auctioneer recognizes. Transactions resulting from accepted bids and offers are recorded. This continues until there are no more acceptable bids or offers. Remarkably, the experiment consistently terminates in a Walrasian price. The main result of this paper is a mechanism in the spirit of the DOA that converges to a Walrasian equilibrium in a polynomial number of steps, thus providing a theoretical basis for the above-described empirical phenomenon. It is well-known that computation of a Walrasian equilibrium for this market corresponds to solving a maximum weight bipartite matching problem. The uncoordinated but rational responses of agents thus solve in a distributed fashion a maximum weight bipartite matching problem that is encoded by their private valuations. We show, furthermore, that every Walrasian equilibrium is reachable by some sequence of responses. This is in contrast to the well known auction algorithms for this problem which only allow one side to make offers and thus essentially choose an equilibrium that maximizes the surplus for the side making offers. Our results extend to the setting where not every agent pair is allowed to trade with each other.
AB - A classical trading experiment consists of a set of unit demand buyers and unit supply sellers with identical items. Each agent’s value or opportunity cost for the item is their private information and preferences are quasi-linear. Trade between agents employs a double oral auction (DOA) in which both buyers and sellers call out bids or offers which an auctioneer recognizes. Transactions resulting from accepted bids and offers are recorded. This continues until there are no more acceptable bids or offers. Remarkably, the experiment consistently terminates in a Walrasian price. The main result of this paper is a mechanism in the spirit of the DOA that converges to a Walrasian equilibrium in a polynomial number of steps, thus providing a theoretical basis for the above-described empirical phenomenon. It is well-known that computation of a Walrasian equilibrium for this market corresponds to solving a maximum weight bipartite matching problem. The uncoordinated but rational responses of agents thus solve in a distributed fashion a maximum weight bipartite matching problem that is encoded by their private valuations. We show, furthermore, that every Walrasian equilibrium is reachable by some sequence of responses. This is in contrast to the well known auction algorithms for this problem which only allow one side to make offers and thus essentially choose an equilibrium that maximizes the surplus for the side making offers. Our results extend to the setting where not every agent pair is allowed to trade with each other.
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U2 - https://doi.org/10.1007/978-3-662-48995-6_5
DO - https://doi.org/10.1007/978-3-662-48995-6_5
M3 - Conference contribution
SN - 9783662489949
T3 - Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
SP - 60
EP - 73
BT - Web and Internet Economics - 11th International Conference, WINE 2015, Proceedings
A2 - Schäfer, Guido
A2 - Markakis, Evangelos
PB - Springer Verlag
T2 - 11th International Conference on Web and Internet Economics, WINE 2015
Y2 - 9 December 2015 through 12 December 2015
ER -