Stability and optimal double auction design for a two-sided market

Aditya Vikram

Mathematical Social Sciences, 2025, vol. 133, issue C, 1-12

Abstract: We investigate the stability of internet platform trading mechanisms using the notion of ex-ante incentive compatible core defined by Forges et al. (2002) in the context of an exchange economy. A mechanism can be blocked by a single buyer and seller pair if they can find an interim incentive-compatible trading mechanism that gives them higher ex-ante expected utilities. Standard double auction mechanisms like the trade reduction mechanism and McAfee double auction mechanism may not be single-buyer–single-seller (SBSS) ex-ante stable. We characterize interim incentive-compatible, interim individually-rational, symmetric and revenue-maximizing mechanisms that are SBSS ex-ante stable using methods in Myerson and Satterthwaite (1983).

Keywords: Double auction; Trading mechanism; Ex-ante stability; Revenue; Platform (search for similar items in EconPapers)
JEL-codes: D44 D47 D82 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:133:y:2025:i:c:p:1-12

DOI: 10.1016/j.mathsocsci.2024.11.003

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