A double auction protocol robust to false-name bids

Abstract

The auction is a fast-developing, important area of electronic commerce in which software agent techniques are expected to find promising applications. By the use of the Internet, large-scale auctions can be realized at low cost. On the other hand, there arises the problem of illegal conduct of a new type, utilizing the name-concealment properties of the network. This paper proposes a new double auction protocol guaranteeing robustness to false-name bids, which constitute one type of such illegal conduct. The double auction is an auction in which multiple buyers/sellers exist and engage in bidding. It is widely used in dealing with foreign currency, credit, stocks, and other goods. For cases in which there is no false-name bid, the double auction protocol (PMD protocol) has been proposed, which is motivation-compatible in the dominant strategy. Considering the possible case in which the seller pretends to be a buyer and bids under another name, it is possible in the PMD protocol for the bidder to increase his benefit by a false-name bid. Thus, motivation compatibility is not guaranteed. This paper proposes the threshold price double auction protocol (TPD), which is motivation-compatible in the dominant strategy even if false-name bids are possible. The TPD protocol has the feature that the number of deals and the prices of deals are controlled by using the threshold price of the good. It is shown by simulation experiments that the TPD protocol realizes a social surplus which is very close to the Pareto-efficient assignment by appropriately setting the threshold price. © 2005 Wiley Periodicals, Inc. Electron Comm Jpn Pt 2, 88(5): 50–59, 2005; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ecjb.20180