Generalized Vickrey mechanisms have received wide attention in the combinatorial auction design literature because they are efficient and strategy-proof. However, it is well known that it is impossible for an exchange, with multiple buyers and sellers and voluntary participation, to be efficient and budget-balanced, even relaxing dominant strategy requirements. Except for special cases, a market-maker in an efficient exchange must make more payments than it collects. Taking a constructive approach, we clear exchanges to maximize reported surplus, and explore the efficiency effects of different budget-balanced payment rules. The payment rules are formulated to minimize the distance to Vickrey payments, under different metrics. Different rules lead to different level of truth-revelation, and therefore 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, has good properties. The scheme exploits agent uncertainty about bids from other agents to reduce manipulation opportunities.
By: David C. Parkes, Jayant Kalagnanam, Marta Eso
Published in: RC22218 in 2001
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