The Combinatorial Seller’s Bid Double Auction: An Asymptotically Efficient Market Mechanism*

We consider the problem of efficient mechanism design for multilateral trading of multiple goods with independent private types for players and incomplete information among them. The problem is partly motivated by an efficient resource allocation problem in communication networks where there are both buyers and sellers. In such a setting, ex post budget balance and individual rationality are key requirements, while efficiency and incentive compatibility are desirable goals. Such mechanisms are difficult if not impossible to design [34]. We propose a combinatorial market mechanism which in the complete information case is always efficient, budget-balanced, ex post individual rational and “almost” dominant strategy incentive compatible. In the incomplete information case, it is budget-balanced, ex post individual rational and asymptotically efficient and Bayesian incentive compatible. Thus, we are able to achieve efficiency, budget-balance and individual rationality by compromising on incentive compatibility, achieving only a weak version of it. This seems to be the only known combinatorial market mechanism with these properties.