The paper studies the problem of maximizing the gains from trade (GFT) in two-sided markets, where there are m unit-demand buyers and n unit-supply sellers. The authors consider the double auction setting and focus on the GFT as the measure of efficiency.
The key insights are:
Seller Trade Reduction (STR), a variant of the Trade Reduction mechanism, can achieve GFT at least as high as the first-best GFT in the original market by augmenting the market with a constant number of additional buyers and sellers, when the buyers' value distribution first-order stochastically dominates the sellers' distribution.
For any ε > 0 and any set of O(1/ε) buyers and O(1/ε) sellers where the buyers' value exceeds the sellers' value with constant probability, augmenting these agents into any market allows the Trade Reduction mechanism to achieve a (1-ε)-approximation of the optimal GFT in the augmented market, without any knowledge of the original market.
The key technical contributions are:
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by Yang Cai,Chr... at arxiv.org 04-01-2024
https://arxiv.org/pdf/2307.03844.pdfDeeper Inquiries