Double Auction on Diffusion Network

Mechanism design on social networks has attracted extensive attention recently. The goal is to design mechanisms to incentivize participants to invite more participants via their social networks, and the challenge is that the participants are competitors. Various mechanisms have been proposed for single-/multiple-unit auctions, but it has been shown that it is challenging to design such mechanisms for more complex settings. We move this forward to investigate a double auction on a network where each trader (a buyer or a seller) can link to other buyers and sellers. Incentiving invitation is more difficult than in multi-unit one-sided auctions, because there are two different roles and a buyer (seller) seems happy to invite a seller (buyer), but again the invited seller (buyer) may invite another buyer (seller) to compete with the original buyer (seller). To combat this, we propose a solution called dynamic trade reduction (DTR), which also guarantees a non-negative revenue for the market owner. Interestingly, our solution is also applicable to the multi-unit one-sided auction when there is only one seller linking to only buyers on the network. We believe that the principle of our solution has the potential to be extended to design the multi-item one-sided auction.