Robust Double Auction Mechanisms

Robust Double Auction Mechanisms

We study the robust double auction mechanisms, that is, the double auction mechanisms that satisfy dominant strategy incentive compatibility, expost individual rationality and ex-post budget balance. We first establish that the price in any robust mechanism does not depend on the valuations of the trading players. We next establish that, with a non-bossiness assumption, the price in any robust mechanism does not depend on players’ valuations at all, whether trading or non-trading. Our main result is the characterization result that, with a nonbossy assumption along with other assumptions on the properties of the mechanism, the generalized posted mechanism in which a constant price is posted for each possible set of traders is the only robust double auction mechanism.