Abstract

Generalized Vickrey mechanisms have received wide attention in the literature because they are efficient and strategyproof, i.e. truthful bidding is optimal whatever the bids of other agents. However it is well-known that it is impossible for an exchange, with multiple buyers and sellers, to be efficient and budget-balanced, even putting strategy-proofness to one side. A market-maker in an efficient exchange must make more payments than it collects. We enforce budget-balance as a hard constraint, and explore payment rules to distribute surplus after an exchange clears to minimize distance to Vickrey payments. Different rules lead to different levels of truthrevelation and efficiency. Experimental and theoretical analysis suggest a simple Threshold scheme, which gives surplus to agents with payments further than a certain threshold value from their Vickrey payments. The scheme appears able to exploit agent uncertainty about bids from other agents to reduce manipulation and boost allocative efficiency in comparison with other simple rules.

Citations