Double auction with interdependent values: Incentives and efficiency

Abstract

We study a double auction environment where buyers and sellers have in-terdependent valuations and multi-unit demand and supply. We propose a new mech-anism which satisfies ex post incentive compatibility, individual rationality, feasibility, non-wastefulness, and no budget deficit. Moreover, this mechanism is asymptotically efficient in that the trade outcome in the mechanism converges to the efficient level as in a competitive equilibrium as the numbers of the buyers and sellers become large. Our mechanism is the first double auction mechanism with these properties in the interde-pendent values setting.