Truthful and Competitive Double Auctions

  • Kaustubh Deshmukh
  • Andrew V. Goldberg
  • Jason D. Hartline
  • Anna R. Karlin
Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 2461)


In this paper we consider the problem of designing a mechanism for double auctions where bidders each bid to buy or sell one unit of a single commodity. We assume that each bidder’s utility value for the item is private to them and we focus on truthful mechanisms, ones were the bidders’ optimal strategy is to bid their true utility. The profit of the auctioneer is the difference between the total payments from buyers and to tal to the sellers. We aim to maximize this profit. We extend the competitive analysis framework of basic auctions [9] and give an upper bound on the profit of any truthful double auction. We then reduce the competitive double auction problem to basic auctions by showing that any competitive basic auction can be converted into a competitive double auction with a competitive ratio of twice that of the basic auction. In addition, we show that better competitive ratios can be obtained by directly adapting basic auction techniques to the double auction problem. This result provides insight into the design of profit maximizing mechanisms in general.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. [1]
    Z. Bar-Yossef, K. Hildrum, and F. Wu. Incentive-compatible online auctions for digital goods. In Proc. 13th Symp. on Discrete Alg. ACM/SIAM, 2002.Google Scholar
  2. [2]
    A. Blum, T. Sandholm, and M. Zinkevich. Online algorithms for market clearing. In Proc. 13th Symp. on Discrete Alg., pages 971–980, 2002.Google Scholar
  3. [3]
    J. Bulow and J. Roberts. The Simple Economics of Optimal Auctions. The Journal of Political Economy, 97:1060–90, 1989.CrossRefGoogle Scholar
  4. [4]
    E. H. Clarke. Multipart Pricing of Public Goods. Public Choice, 11:17–33, 1971.CrossRefGoogle Scholar
  5. [5]
    S. DeVries and R. Vohra. Combinatorial Auctions: A survey. Unpublished manuscript, 2000.Google Scholar
  6. [6]
    A. Fiat, A. V. Goldberg, J. D. Hartline, and A. Karlin. Competitive generalized auctions. In Proc. 34rd ACM Symposium on the Theory of Computing. ACM Press, 2002. To appear.Google Scholar
  7. [7]
    Daniel Friedman and John Rust, editors. The Double Auction Market: Institutions, Theories, and Evidence. Addison Wesley, 1993.Google Scholar
  8. [8]
    A. V. Goldberg and J. D. Hartline. Competitiveness via consensus. Technical Report MSR-TR-2002-73, Microsoft Research, Mountain View, CA., 2002.Google Scholar
  9. [9]
    A. V. Goldberg, J. D. Hartline, A. Karlin, and A. Wright. Competitive Auctions. Submitted to Games and Economic Behavior., 2001.Google Scholar
  10. [10]
    A. V. Goldberg, J. D. Hartline, and A. Wright. Competitive Auctions and Digital Goods. In Proc. 12th Symp. on Discrete Alg., pages 735–744. ACM/SIAM, 2001. Also available as InterTrust Technical Report STAR-TR-99.09.01, 1999,
  11. [11]
    T. Groves. Incentives in Teams. Econometrica, 41:617–631, 1973.MATHCrossRefMathSciNetGoogle Scholar
  12. [12]
    P. Klemperer. Auction theory: A guide to the literature. In Journal of Economic Surveys, pages 227–286. 13(3), 1999.CrossRefGoogle Scholar
  13. [13]
    R. Preston McAfee. A dominant strategy double auction. In Journal of Economic Theory, volume 56, pages 434–450, 1992.MATHCrossRefMathSciNetGoogle Scholar
  14. [14]
    H. Moulin and S. Shenker. Strategyproof Sharing of Submodular Costs. to appear in Economic Theory.Google Scholar
  15. [15]
    R. Myerson. Optimal Auction Design. Mathematics of Operations Research, 6:58–73, 1981.MATHMathSciNetCrossRefGoogle Scholar
  16. [16]
    T. Sandholm and S. Suri. Market clearability. In Proc. of the 17th International Joint Conf. on Artificial Intelligence (IJCAI), pages 1145–1151, 2001.Google Scholar
  17. [17]
    W. Vickrey. Counterspeculation, Auctions, and Competitive Sealed Tenders. J. of Finance, 16:8–37, 1961.CrossRefGoogle Scholar
  18. [18]
    P. Wurman, W. Walsh, and M. Wellman. Flexible double auctions for electronic commerce: Theory and implementation. In Decision Support Systems, volume 24, pages 17–27, 1998.CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2002

Authors and Affiliations

  • Kaustubh Deshmukh
    • 1
  • Andrew V. Goldberg
    • 2
  • Jason D. Hartline
    • 1
  • Anna R. Karlin
    • 1
  1. 1.Computer Science DepartmentUniversity of WashingtonUSA
  2. 2.Microsoft ResearchMountain View

Personalised recommendations