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Asymptotically optimal prior-free asset market mechanisms

Publication ,  Journal Article
Loertscher, S; Marx, LM
Published in: Games and Economic Behavior
January 1, 2023

We develop a prior-free mechanism for an asset market that is dominant-strategy incentive compatible, ex post individually rational, constrained efficient, and asymptotically optimal—as the number of agents grows large, the designer's profit from using this mechanism approaches the profit it would optimally make if it knew the agents' type distribution at the outset. The direct implementation first identifies the agent whose value equals the Walrasian price. The second step can be described algorithmically as consisting of ascending and descending clock auctions that start from the Walrasian price, estimate virtual types, and stop eliminating trades when the estimated virtual value exceeds the estimated virtual cost. The mechanism permits partial clock auction implementation. Our approach accommodates heterogeneity among groups of traders and discrimination among these, provided heterogeneity is not too accentuated.

Duke Scholars

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Published In

Games and Economic Behavior

DOI

EISSN

1090-2473

ISSN

0899-8256

Publication Date

January 1, 2023

Volume

137

Start / End Page

68 / 90

Related Subject Headings

  • Economic Theory
  • 3803 Economic theory
  • 3801 Applied economics
  • 1402 Applied Economics
  • 1401 Economic Theory
 

Citation

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Loertscher, S., & Marx, L. M. (2023). Asymptotically optimal prior-free asset market mechanisms. Games and Economic Behavior, 137, 68–90. https://doi.org/10.1016/j.geb.2022.10.013
Loertscher, S., and L. M. Marx. “Asymptotically optimal prior-free asset market mechanisms.” Games and Economic Behavior 137 (January 1, 2023): 68–90. https://doi.org/10.1016/j.geb.2022.10.013.
Loertscher S, Marx LM. Asymptotically optimal prior-free asset market mechanisms. Games and Economic Behavior. 2023 Jan 1;137:68–90.
Loertscher, S., and L. M. Marx. “Asymptotically optimal prior-free asset market mechanisms.” Games and Economic Behavior, vol. 137, Jan. 2023, pp. 68–90. Scopus, doi:10.1016/j.geb.2022.10.013.
Loertscher S, Marx LM. Asymptotically optimal prior-free asset market mechanisms. Games and Economic Behavior. 2023 Jan 1;137:68–90.
Journal cover image

Published In

Games and Economic Behavior

DOI

EISSN

1090-2473

ISSN

0899-8256

Publication Date

January 1, 2023

Volume

137

Start / End Page

68 / 90

Related Subject Headings

  • Economic Theory
  • 3803 Economic theory
  • 3801 Applied economics
  • 1402 Applied Economics
  • 1401 Economic Theory