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Double auction for trading perfect complements

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  • Rakesh Chaturvedi
  • Ashish Kumar Pandey

Abstract

For a trading problem where a buyer is interested in an aggregate resource with fragmented ownership, the individually owned resources are perfect complements in trade. A double auction, chosen in accordance with a value alignment principle which we formulate, is shown to be strategy proof for owners. Since it also values the aggregate resource correctly, it mitigates the holdout problem by changing the source of inefficiency from complementarity on owners' side to lack of competition on buyer side. The value alignment principle implies that this double auction has a majority trading rule. With multiple buyers, a suitable modification makes the double auction strategy proof even for the buyers, thus mitigating the holdout problem by achieving approximate ex post efficiency when the number of owners is large.

Suggested Citation

  • Rakesh Chaturvedi & Ashish Kumar Pandey, 2024. "Double auction for trading perfect complements," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.
    • Handle: RePEc:bla:jpbect:v:26:y:2024:i:1:n:e12672
    DOI: 10.1111/jpet.12672
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