Dynamic Double Auctions: Toward First Best

Abstract

Efficient and Profit-Maximizing Dynamic Double Auctions for Two-Sided Markets Two-sided markets that enable sellers and buyers to trade have received considerable attention in the past decade. Prominent examples include online advertising, freelancing, and ride-hailing. In these markets, trade is coordinated by an intermediating platform that determines which parties should trade, collects payments from buyers, and transfers payments to sellers. How should trading mechanisms be designed when agents repeatedly trade over time? In the paper “Dynamic Double Auctions: Toward First Best,” Balseiro, Mirrokni, Paes Leme, and Zuo design dynamic double auctions that satisfy the following practical requirements: no positive transfers, that is, the platform never asks sellers to make payments nor are buyers ever paid; and periodic individual rationality, that is, agents should derive a nonnegative utility from every trade opportunity. This work provides mechanisms satisfying these requirements that, as the number of trading opportunities grows, are asymptotically efficient, budget balanced, and allow to extract the welfare generated by the market as profit.