Theoretical Economics 12 (2017), 1393–1438

We study a double auction environment where buyers and sellers have inter-dependent valuations and multiunit demand and supply. We propose a new mechanism, the groupwise-price mechanism. We show that the mechanism satisfies ex post incentive compatibility, individual rationality, feasibility, non-wastefulness, and no budget deficit. Moreover, the mechanism is asymptotically efficient in that the trade outcome in the mechanism converges to the efficient level as in a competitive equilibrium as the numbers of the buyers and sellers become large. Our groupwise-price mechanism is the first double auction mechanism with these properties in the interdependent values setting.

Keywords: Double auction, interdependent values, multi-unit demand and supply, ex post incentive compatibility, asymptotic efficiency

JEL classification: D44, D47, D82