51²è¹Ý

Title: Budget-balanced mechanisms for multilateral exchange

Abstract – We consider a market with multiple buyers and multiple sellers where every seller owns one indivisible object. Buyers have unit demand and do not distinguish between objects. All valuations are private information. We characterize the full class of deterministic, strategyproof, individually rational, and budget-balanced (SIB) mechanisms for this exchange problem when there are at most two buyers and two sellers. Every SIB mechanism in this setting is described by a set of permissible trades and, for each permissible trade a partition of the eligible non-trading agents into influencers and sinks. An influencer's valuation enters the price functions governing the trade but she receives zero payment. A sink receives a payment absorbing any budget surplus but her valuation cannot affect the terms of trade. No agent can be both. The prices at which trade occurs are functions only of influencer valuations, and trade takes place if and only if both the buyer and seller find the offered price acceptable. This characterization covers bilateral trade and other double auctions in literature as a special case.