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Setting an effective pricing policy for double auction marketplaces

Setting an effective pricing policy for double auction marketplaces
Setting an effective pricing policy for double auction marketplaces
In this paper, we analyse how double auction marketplaces set an effective pricing policy to determine the transaction prices for matched buyers and sellers. We analyse this problem by considering continuous privately known trader types. Furthermore, we consider two typical pricing policies: equilibrium k pricing policy and discriminatory k pricing policy. We firstly investigate how to determine the transaction prices to reach the maximal allocative efficiency in an isolated marketplace when the traders adopt Bayes-Nash equilibrium bidding strategies. We find that when the marketplace adopts discriminatory k pricing policy, the maximal allocative efficiency is reached by setting k = 0.41 or 0.59. We find that equilibrium k pricing policy provides higher allocative efficiency than discriminatory k pricing policy. We further discuss how different pricing policies can affect traders' Bayes-Nash equilibrium bidding strategies. Furthermore, we extend the analysis to the setting with two marketplaces competing against each other to attract traders. We find that the marketplace using equilibrium k pricing policy is more likely to beat the marketplace using discriminatory k pricing policy, where all traders converge to the marketplace using equilibrium k pricing policy in Bayes-Nash equilibrium. Our analysis can provide meaningful insights for designing an effective pricing policy.
Pricing policy, Double auction, Market selection and bidding strategy, Fictitious play, Bayes-Nash equilibrium
457-471
Springer Verlag
Shi, Bing
62e2a794-c690-45cc-8da6-993a75ecff7e
Huang, Yalong
4fce76f3-75f9-4a84-a27b-a97cda20567d
Xiong, Shengwu
03f99e9b-5685-4899-a11c-79ddb99be18c
Gerding, Enrico H.
d9e92ee5-1a8c-4467-a689-8363e7743362
Shi, Bing
62e2a794-c690-45cc-8da6-993a75ecff7e
Huang, Yalong
4fce76f3-75f9-4a84-a27b-a97cda20567d
Xiong, Shengwu
03f99e9b-5685-4899-a11c-79ddb99be18c
Gerding, Enrico H.
d9e92ee5-1a8c-4467-a689-8363e7743362

Shi, Bing, Huang, Yalong, Xiong, Shengwu and Gerding, Enrico H. (2016) Setting an effective pricing policy for double auction marketplaces. In, PRICAI 2016: TRENDS IN ARTIFICIAL INTELLIGENCE: 14th Pacific Rim International Conference on Artificial Intelligence, Phuket, Thailand, August 22-26. (Lecture Notes in Computer Science, , (doi:10.1007/978-3-319-42911-3_38), 9810) Springer Verlag, pp. 457-471. (doi:10.1007/978-3-319-42911-3_38).

Record type: Book Section

Abstract

In this paper, we analyse how double auction marketplaces set an effective pricing policy to determine the transaction prices for matched buyers and sellers. We analyse this problem by considering continuous privately known trader types. Furthermore, we consider two typical pricing policies: equilibrium k pricing policy and discriminatory k pricing policy. We firstly investigate how to determine the transaction prices to reach the maximal allocative efficiency in an isolated marketplace when the traders adopt Bayes-Nash equilibrium bidding strategies. We find that when the marketplace adopts discriminatory k pricing policy, the maximal allocative efficiency is reached by setting k = 0.41 or 0.59. We find that equilibrium k pricing policy provides higher allocative efficiency than discriminatory k pricing policy. We further discuss how different pricing policies can affect traders' Bayes-Nash equilibrium bidding strategies. Furthermore, we extend the analysis to the setting with two marketplaces competing against each other to attract traders. We find that the marketplace using equilibrium k pricing policy is more likely to beat the marketplace using discriminatory k pricing policy, where all traders converge to the marketplace using equilibrium k pricing policy in Bayes-Nash equilibrium. Our analysis can provide meaningful insights for designing an effective pricing policy.

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More information

e-pub ahead of print date: 10 August 2016
Keywords: Pricing policy, Double auction, Market selection and bidding strategy, Fictitious play, Bayes-Nash equilibrium
Organisations: Agents, Interactions & Complexity

Identifiers

Local EPrints ID: 406683
URI: http://eprints.soton.ac.uk/id/eprint/406683
PURE UUID: 93822f2a-bcbb-4a0c-9f97-b504a398c273
ORCID for Enrico H. Gerding: ORCID iD orcid.org/0000-0001-7200-552X

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Date deposited: 18 Mar 2017 02:28
Last modified: 20 Jul 2019 00:56

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Contributors

Author: Bing Shi
Author: Yalong Huang
Author: Shengwu Xiong
Author: Enrico H. Gerding ORCID iD

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