Large market games with near optimal efficiency

Richard Cole, Yixin Tao

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

As is well known, many classes of markets have efficient equilibria, but this depends on agents being non-strategic, i.e. that they declare their true demands when offered goods at particular prices, or in other words, that they are price-takers. An important question is how much the equilibria degrade in the face of strategic behavior, i.e. what is the Price of Anarchy (PoA) of the market viewed as a mechanism? Often, PoA bounds are modest constants such as -4/3 or 2. Nonetheless, in practice a guarantee that no more than 25% or 50% of the economic value is lost may be unappealing. This paper asks whether significantly better bounds are possible under plausible assumptions. In particular, we look at how these worst case guarantees improve in the following large settings. - Large Walrasian auctions: These are auctions with many copies of each item and many agents. We show that the PoA tends to 1 as the market size increases, under suitable conditions, mainly that there is some uncertainty about the numbers of copies of each good and demands obey the gross substitutes condition. We also note that some such assumption is unavoidable. - Large Fisher markets: Fisher markets are a class of economies that has received considerable attention in the computer science literature. A large market is one in which at equilibrium, each buyer makes only a small fraction of the total purchases; the smaller the fraction, the larger the market. Here the main condition is that demands are based on homogeneous monotone utility functions that satisfy the gross substitutes condition. Again, the PoA tends to 1 as the market size increases. Furthermore, in each setting, we quantify the tradeoff between market size and the PoA.

Original languageEnglish (US)
Title of host publicationEC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation
PublisherAssociation for Computing Machinery, Inc
Pages791-808
Number of pages18
ISBN (Electronic)9781450339360
DOIs
StatePublished - Jul 21 2016
Event17th ACM Conference on Economics and Computation, EC 2016 - Maastricht, Netherlands
Duration: Jul 24 2016Jul 28 2016

Other

Other17th ACM Conference on Economics and Computation, EC 2016
CountryNetherlands
CityMaastricht
Period7/24/167/28/16

Fingerprint

Price of Anarchy
Game
Computer science
Economics
Auctions
Substitute
Gross
Tend
Market
Market games
Monotone Function
Price of anarchy
Utility Function
Computer Science
Quantify
Trade-offs
Uncertainty
Market size
Guarantee

Keywords

  • Fisher markets
  • Large market games
  • Price of anarchy
  • Walrasian auctions

ASJC Scopus subject areas

  • Statistics and Probability
  • Computer Science (miscellaneous)
  • Economics and Econometrics
  • Computational Mathematics

Cite this

Cole, R., & Tao, Y. (2016). Large market games with near optimal efficiency. In EC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation (pp. 791-808). Association for Computing Machinery, Inc. https://doi.org/10.1145/2940716.2940720

Large market games with near optimal efficiency. / Cole, Richard; Tao, Yixin.

EC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation. Association for Computing Machinery, Inc, 2016. p. 791-808.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Cole, R & Tao, Y 2016, Large market games with near optimal efficiency. in EC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation. Association for Computing Machinery, Inc, pp. 791-808, 17th ACM Conference on Economics and Computation, EC 2016, Maastricht, Netherlands, 7/24/16. https://doi.org/10.1145/2940716.2940720
Cole R, Tao Y. Large market games with near optimal efficiency. In EC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation. Association for Computing Machinery, Inc. 2016. p. 791-808 https://doi.org/10.1145/2940716.2940720
Cole, Richard ; Tao, Yixin. / Large market games with near optimal efficiency. EC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation. Association for Computing Machinery, Inc, 2016. pp. 791-808
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