Design of a multi-agent based iterative multi-item double auction mechanism

Abstract

There have been many multi-item auction mechanisms. As it is not allowed for both sellers and buyers to submit bids and offers in nearly all existing multi-item auction mechanisms, the impartial profit distribution for both sellers and buyers cannot be realized in those mechanisms. Under the assumption that buyers strive for maximum profit, multi-item English auctions lead to equilibriums close to the minimum competitive equilibrium that is the worst result for sellers. And under the assumption that sellers strive for maximum profit, multi-item Dutch auctions lead to equilibriums close to the maximum competitive equilibrium that is the worst result for buyers. Although it is possible for both sellers and buyers to submit bids and offers in a combinatorial exchange, the impartial profit distribution for all individual participants cannot be realized due to its pricing mechanism that focuses only on enforcing budget balance. This paper proposes an iterative multi-item unit-demand and unit-supply double-auction mechanism that can distribute profit impartially from the viewpoints of individual participants regardless of whether they are buyers or sellers. A new winner determination and pricing mechanism that considers profit restoration and oscillation avoidance are designed. Theoretical features such as dominant strategies, efficiency, strategy-proofness, the validity of the closing condition and deterministic nature of the proposed mechanism are analyzed. It is also shown that the proposed mechanism determines clearing prices according to the market situation in single item markets.