A dominant-strategy asset market mechanism

Simon Loertscher and Leslie M. Marx

Games and Economic Behavior, 2020, vol. 120, issue C, 1-15

Abstract: Asset markets—institutions that reallocate goods among agents with heterogeneous endowments, demands, and valuations—abound in the real world but have received little attention in mechanism and market design. Assuming constant marginal, private values and known endowments and maximum demands, we provide a detail-free, dominant-strategy asset market mechanism that allocates efficiently or close to efficiently, respects traders' individual rationality constraints ex post, and never runs a deficit. If it does not allocate efficiently, it sacrifices the trades that under efficiency would involve the lowest-value trader who efficiently would be allocated a positive amount. The mechanism always allocates the quantity traded efficiently and permits clock implementation. As the market becomes large, the mechanism's efficiency loss converges to zero under natural conditions.

Keywords: Market mechanism; Endogenous trading position; Deficit free; Detail free (search for similar items in EconPapers)
JEL-codes: C72 D44 L13 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:120:y:2020:i:c:p:1-15

DOI: 10.1016/j.geb.2019.12.001

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