A diffusion mechanism for multi-unit commodity allocation in economic networks

Abstract

In this research, we aim to minimise the total cost of procuring multi-units of commodities. In classical procurement paradigms, the buyer is only aware of a limited number of sellers. This limited participation of sellers might lead to drop-in competition, which in turn, leads to higher procurement cost. In this regard, we propose a novel decentralised group commodity allocation approach. The proposed approach introduces an information diffusion based dual-bid procurement auction mechanism. This mechanism incentivises the participating sellers to report their valuations truthfully. Also, it encourages them to spread the procurement information to other neighbouring sellers. As a result, the proposed mechanism helps each buyer to reach out to the distant sellers and procure the required amount of commodities at the minimum possible price. Additionally, the proposed mechanism intends to give fair chances to the distant sellers to participate in the procurement auction. Finally, we prove that the proposed mechanism is incentive-compatible and individually rational. Besides, we also show that the proposed mechanism has a lower procurement cost than the direct extension of the Vickrey-Clarke-Groves (VCG) mechanism.