Cited By
View all- Nguyen TVohra R(2024)(Near-)Substitute Preferences and Equilibria with IndivisibilitiesJournal of Political Economy10.1086/731413132:12(4122-4154)Online publication date: 1-Dec-2024
Linear Pricing Mechanisms for Markets without Convexity
Page 300
Abstract
We introduce two linear pricing mechanisms for quasilinear economies in which market-clearing prices may not exist. Electricity markets, fisheries markets, and many others include producers with start-up costs, ramping costs, or other fixed costs that fail the convexity assumptions traditionally used to prove that clearing prices exist.
Each mechanism relaxes a condition of Walrasian equilibrium. While the Walrasian mechanism determines payments among buyers and sellers using a single price vector, our markup mechanism allows one more parameter -- a multiplier -- that marks up the prices paid by buyers above those paid to sellers. These markups allow the mechanism to avoid budget deficits even when non-convexities lead to failures of market-clearing. And while the Walrasian mechanism assigns each producer its preferred production plan, our rationing mechanism carefully rations some buyers.
Both mechanisms always produce feasible allocations, avoid budget deficits, and are computationally tractable. The proportion of efficient surplus lost in the markup mechanism is O(1/N), where N is the number of buyers and sellers. When agents on the buyer side have convex preferences and strongly monotone demand, the rationing mechanism suffers a smaller welfare loss, namely O(1/N2-ε) for all ε>0. Importantly, both mechanisms have good large-market incentive properties similar to those of the Walrasian mechanism.
Key to our construction of these mechanisms and of some independent interest is our new Bound-Form First Welfare Theorem for quasilinear economies, which gives an upper bound on the deadweight loss of any feasible allocation ω in terms of any positive price vector p. It asserts that the welfare loss is bounded above by B+R, where B is the budget deficit from ω at prices p, which is non-zero when supply strictly exceeds demand, and R is the sum of the rationing losses suffered by each individual agent n when its allocated bundle ωn is different from its preferred bundle at price vector p. The Bound Form First Welfare Theorem takes its name from its implication that the welfare loss is zero when (p,ω) is a competitive equilibrium.
The full paper is available at https://mitchwatt.github.io/files/PricingMechanismsNonConvex.pdf.
Index Terms
- Linear Pricing Mechanisms for Markets without Convexity
Recommendations
Pricing Rule in a Clock Auction
We analyze a discrete clock auction with lowest-accepted-bid (LAB) pricing and provisional winners, as adopted by India for its 3G spectrum auction. In a perfect Bayesian equilibrium, the provisional winner shades her bid, whereas provisional losers do ...
The Invisible Hand of Dynamic Market Pricing
EC '16: Proceedings of the 2016 ACM Conference on Economics and ComputationWalrasian prices, if they exist, have the property that one can assign every buyer some bundle in her demand set, such that the resulting assignment will maximize social welfare. Unfortunately, this assumes carefully breaking ties amongst different ...
Competing sellers in online markets: reserve prices, shill bidding, and auction fees
AAMAS '06: Proceedings of the fifth international joint conference on Autonomous agents and multiagent systemsIn this paper, we consider competition between sellers offering similar items in concurrent online auctions, where each seller must set its individual auction parameters (such as the reserve price) in such a way as to attract buyers. We show that there ...
Comments
Information & Contributors
Information
Published In
July 2022
1269 pages
ISBN:9781450391504
DOI:10.1145/3490486
- General Chair:
- David M. Pennock,
- Program Chairs:
- Ilya Segal,
- Sven Seuken
Copyright © 2022 Owner/Author.
Permission to make digital or hard copies of part or all of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for third-party components of this work must be honored. For all other uses, contact the Owner/Author.
Sponsors
Publisher
Association for Computing Machinery
New York, NY, United States
Publication History
Published: 13 July 2022
Check for updates
Author Tags
Qualifiers
- Extended-abstract
Funding Sources
- NSF
Conference
EC '22
Sponsor:
Acceptance Rates
Overall Acceptance Rate 664 of 2,389 submissions, 28%
Upcoming Conference
EC '25
- Sponsor:
- sigecom
Contributors
Other Metrics
Bibliometrics & Citations
Bibliometrics
Article Metrics
- View Citations1Total Citations
- 261Total Downloads
- Downloads (Last 12 months)142
- Downloads (Last 6 weeks)76
Reflects downloads up to 07 Mar 2025
Other Metrics
Citations
Cited By
View all- Nguyen TVohra R(2024)(Near-)Substitute Preferences and Equilibria with IndivisibilitiesJournal of Political Economy10.1086/731413132:12(4122-4154)Online publication date: 1-Dec-2024
View Options
Login options
Check if you have access through your login credentials or your institution to get full access on this article.
Sign in