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Market clearing price and equilibriaof the progressive second price mechanism

Published online by Cambridge University Press:  11 October 2007

Patrick Maillé
Patrick Maillé*
Affiliation:
GET/ENST Bretagne, 2 Rue de la Châtaigneraie, CS 17607, 35576 Cesson Sévigné Cedex, France; [email protected]
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Abstract


The Progressive Second Price mechanism (PSP), recently introduced byLazar and Semret to share aninfinitely-divisible resource among users through pricing, has been shown to verifyvery interesting properties. Indeed, the incentive compatibilityproperty of that scheme, and the convergence toan efficient resource allocation where established, using the frameworkof Game Theory.Therefore, that auction-based allocation and pricing scheme seemsparticularly well-suited to solve congestion problems intelecommunication networks, where the resource to share is theavailable bandwidth on a link.This paper aims atsupplementing the existing results by highlighting some properties of thedifferent equilibria that can be reached. We precisely characterize the possible outcomes of thePSP auction game in terms of players bid price: when the bid fee (cost of a bid update) tends to zero then the bid price of all users at equilibrium gets close to the so-called market clearing price of the resource. Therefore, observing an equilibrium of the PSP auction game gives some accurate information about the market clearing price of the resource.

Keywords

Network pricingGame theoryAuctions
Type
Research Article
Information
RAIRO - Operations Research , Volume 41 , Issue 4 , October 2007 , pp. 465 - 478
Copyright
© EDP Sciences, ROADEF, SMAI, 2007

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