Multilateral deferred-acceptance mechanisms

Abstract

We study the design of multilateral markets, where agents with several different roles engage in trade. We first observe that the modular approach proposed by D¨utting et al. [5] for bilateral markets can also be applied in multilateral markets. This gives a general method to design Deferred Acceptance mechanisms in such settings; these mechanisms, defined by Milgrom and Segal [10], are known to satisfy some highly desired properties. We then show applications of this framework in the context of supply chains. We show how existing mechanisms can be implemented as multilateral Deferred Acceptance mechanisms, and thus exhibit nice practical properties (as group strategy-proofness and equivalence to clock auctions). We use the general framework to design a novel mechanism that improves upon previous mechanisms in terms of social welfare. Our mechanism manages to avoid “trade reduction” in some scenarios, while maintaining the incentive and budget-balance properties.