The Primal Auction: a new design for multi-commodity double auctions (original) (raw)

It this paper, we propose an auction design for a multi-commodity double auction where participants simultaneously submit their valuations (bids) for the commodities. We label this the Primal Auction (PA) mechanism. The auctioneer computes the prevailing market price as the average over the bids and allocates the goods over the bidders in accordance with the relative bid of each bidder compared to this market price. Under the assumption of money metric utility functions, we show convergence of this process to an efficient equilibrium, but only if truth telling by all participants can be enforced. Commitment of all players to pay the prevailing market price at each round of the auction for the commodities allocated to them provides a strong incentive for truthful revelation, since lying means that the bidder has to pay the market price for a non-optimal quantity. However, to address concerns on shill bidding and bid shielding, we implement a stronger test on truth telling by endowing...