Generalized trade reduction mechanisms

Mira Gonen, Rica Gonen, Elan Pavlov

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

25 Scopus citations


When designing a mechanism there are several desirable properties to maintain such as incentive compatibility (IC), individual rationality (IR), and budget balance (BB). It is well known [15] that it is impossible for a mechanism to maximize social welfare whilst also being IR, IC, and BB. There have been several attempts to circumvent [15] by trading welfare for BB, e.g., in domains such as doublesided auctions[13], distributed markets[3] and supply chain problems[2, 4]. In this paper we provide a procedure called a Generalized Trade Reduction (GTR) for single-value players, which given an IR and IC mechanism, outputs a mechanism which is IR, IC and BB with a loss of welfare. We bound the welfare achieved by our procedure for a wide range of domains. In particular, our results improve on existing solutions for problems such as double sided markets with homogenous goods, distributed markets and several kinds of supply chains. Furthermore, our solution provides budget balanced mechanisms for several open problems such as combinatorial double-sided auctions and distributed markets with strategic transportation edges.

Original languageEnglish
Title of host publicationEC'07 - Proceedings of the Eighth Annual Conference on Electronic Commerce
Number of pages10
StatePublished - 2007
Externally publishedYes
Event8th ACM Conference on Electronic Commerce, EC'07 - San Diego, CA, United States
Duration: 11 Jun 200715 Jun 2007

Publication series

NameEC'07 - Proceedings of the Eighth Annual Conference on Electronic Commerce


Conference8th ACM Conference on Electronic Commerce, EC'07
Country/TerritoryUnited States
CitySan Diego, CA


  • Budget balance
  • External competition
  • Internal competition
  • Trade reduction


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