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A Long Way Coming: Designing Centralized Markets with Privately Informed Buyers and Sellers

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  • Simon Loertscher
  • Leslie M. Marx
  • Tom Wilkening

Abstract

We discuss the economics literature relevant to the design of centralized two-sided market mechanisms for environments in which both buyers and sellers have private information. The existing literature and the history of spectrum auctions, including the incentive auction currently being designed by the FCC, can be employed to analyze such mechanisms. We compare the revenue-efficiency trade-off in an environment with private information on one side of the market versus the trade-off with private information on both sides of the market; we provide an impossibility theorem for the efficient allocation of goods using a deficit-free mechanism when there is private information on both sides of the market; we discuss practical deficit-free mechanisms for various environments with two-sided private information; and we provide a synthesis to guide market design efforts and related research going forward. (JEL D44, D47, D82, H82)

Suggested Citation

  • Simon Loertscher & Leslie M. Marx & Tom Wilkening, 2015. "A Long Way Coming: Designing Centralized Markets with Privately Informed Buyers and Sellers," Journal of Economic Literature, American Economic Association, vol. 53(4), pages 857-897, December.
    • Handle: RePEc:aea:jeclit:v:53:y:2015:i:4:p:857-97
    Note: DOI: 10.1257/jel.53.4.857
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Simon Loertscher & Leslie M. Marx, 2023. "Bilateral Trade with Multiunit Demand and Supply," Management Science, INFORMS, vol. 69(2), pages 1146-1165, February.
    2. Antonelli, Cristiano, 2017. "From the Economics of Information to the Economics of Knowledge. Length: pages 39," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201714, University of Turin.
    3. Loertscher, Simon & Marx, Leslie M., 2023. "Asymptotically optimal prior-free asset market mechanisms," Games and Economic Behavior, Elsevier, vol. 137(C), pages 68-90.
    4. Ignacio Palacios-Huerta & David C. Parkes & Richard Steinberg, 2024. "Combinatorial Auctions in Practice," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 517-553, June.
    5. Greve, T. & Pollitt, M., 2016. "A future auction mechanism for distributed generation," Cambridge Working Papers in Economics 1672, Faculty of Economics, University of Cambridge.
    6. Delacrétaz, David & Loertscher, Simon & Marx, Leslie M. & Wilkening, Tom, 2019. "Two-sided allocation problems, decomposability, and the impossibility of efficient trade," Journal of Economic Theory, Elsevier, vol. 179(C), pages 416-454.
    7. Gharad Bryan & Jonathan de Quidt & Tom Wilkening & Nitin Yadav, 2017. "Land Trade and Development: A Market Design Approach," CESifo Working Paper Series 6557, CESifo.
    8. Loertscher, Simon & Marx, Leslie M., 2020. "Asymptotically optimal prior-free clock auctions," Journal of Economic Theory, Elsevier, vol. 187(C).
    9. Antonelli, Cristiano, 2017. "From the Economics of Information to the Economics of Knowledge," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201706, University of Turin.
    10. Loertscher, Simon & Mezzetti, Claudio, 2019. "The deficit on each trade in a Vickrey double auction is at least as large as the Walrasian price gap," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 101-106.
    11. Janssen, Maarten & Karamychev, Vladimir, 2017. "Raising rivals’ cost in multi-unit auctions," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 473-490.
    12. Jonathan Levin & Andrzej Skrzypacz, 2016. "Properties of the Combinatorial Clock Auction," American Economic Review, American Economic Association, vol. 106(9), pages 2528-2551, September.
    13. Nejat Anbarci & Jaideep Roy, 2018. "Double auctions with no-loss constrained traders," Theory and Decision, Springer, vol. 84(1), pages 1-9, January.
    14. Alison Watts, 2018. "Generalized Second Price Auctions over a Network," Games, MDPI, vol. 9(3), pages 1-11, September.
    15. Loertscher, Simon & Marx, Leslie M., 2020. "A dominant-strategy asset market mechanism," Games and Economic Behavior, Elsevier, vol. 120(C), pages 1-15.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property

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