Approximating Gains from Trade in Two-sided Markets via Simple Mechanisms
Abstract
We design simple mechanisms to approximate the Gains from Trade (GFT) in two-sided markets with multiple unit-supply sellers and multiple unit-demand buyers. A classical impossibility result by Myerson and Satterthwaite showed that even with only one seller and one buyer, no Individually Rational (IR), Bayesian Incentive Compatible (BIC) and Budget-Balanced (BB) mechanism can achieve full GFT (trade whenever buyer's value is higher than the seller's cost). On the other hand, they proposed the "second-best" mechanism that maximizes the GFT subject to IR, BIC and BB constraints, which is unfortunately rather complex for even the single-seller single-buyer case. Our mechanism is simple, IR, BIC and BB, and achieves of the optimal GFT among all IR, BIC and BB mechanisms. Our result holds for arbitrary distributions of the buyers' and sellers' values and can accommodate any downward-closed feasibility constraints over the allocations. The analysis of our mechanism is facilitated by extending the Cai-Weinberg-Devanur duality framework to two-sided markets.
Keywords
Cite
@article{arxiv.1706.04637,
title = {Approximating Gains from Trade in Two-sided Markets via Simple Mechanisms},
author = {Johannes Brustle and Yang Cai and Fa Wu and Mingfei Zhao},
journal= {arXiv preprint arXiv:1706.04637},
year = {2017}
}