Incentive ratio: A game theoretical analysis of market equilibria

Ning Chen; Xiaotie Deng; Bo Tang; Hongyang Zhang; Jie Zhang

doi:10.1016/j.ic.2022.104875

Incentive ratio: A game theoretical analysis of market equilibria

Ning Chen
, Xiaotie Deng^*
, Bo Tang
, Hongyang Zhang
, Jie Zhang

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

15 Citations (Scopus)

2 Downloads (CityUHK Scholars)

Abstract

In a Fisher market, the market maker sells m products to n potential agents. The agents submit their utility functions and money endowments to the market maker, who, upon receiving submitted information, derives market equilibrium prices and allocations of the products. Agents are self-interested entities who wish to maximize their utility, and they may misreport their private information for this purpose. The incentive ratio characterizes the extent to which strategic plays can increase an agent's utility. While agents do benefit by misreporting their private information, we show that the ratio of improvement by a unilateral strategic play is no more than two in markets with gross substitute utilities for the agents. Moreover, it can be pinned down to e^1/e≈ 1.445 in Cobb-Douglas markets. For the Leontief markets in which products are complementary, we show that the incentive ratio is at most two as well. © 2022 The Author(s).

Original language	English
Article number	104875
Number of pages	22
Journal	Information and Computation
Volume	285
Issue number	Part B
Online published	22 Feb 2022
DOIs	https://doi.org/10.1016/j.ic.2022.104875
Publication status	Published - May 2022
Externally published	Yes

Funding

Xiaotie Deng was partially supported by Science and Technology Innovation 2030 “New Generation Artificial Intelligence” Major Project No. (2018AAA0100901) and by the NSFC-ISF joint research program (grant No: NSFC-ISF 61761146005). Jie Zhang was supported by a Research Project Grant from The Leverhulme Trust .

Research Keywords

Fisher market
Incentive ratio
Market equilibrium

Publisher's Copyright Statement

This full text is made available under CC-BY-NC-ND 4.0. https://creativecommons.org/licenses/by-nc-nd/4.0/

Access Output

10.1016/j.ic.2022.104875

502774641.pdfFinal Published version, 808 KBLicence: CC BY-NC-ND

Other Access Options

Check CityUHK Library

Permanent Link

Right click to copy link

Cite this

@article{963399eeef1e42b1a5f31b74a6a4f198,

title = "Incentive ratio: A game theoretical analysis of market equilibria",

abstract = "In a Fisher market, the market maker sells m products to n potential agents. The agents submit their utility functions and money endowments to the market maker, who, upon receiving submitted information, derives market equilibrium prices and allocations of the products. Agents are self-interested entities who wish to maximize their utility, and they may misreport their private information for this purpose. The incentive ratio characterizes the extent to which strategic plays can increase an agent's utility. While agents do benefit by misreporting their private information, we show that the ratio of improvement by a unilateral strategic play is no more than two in markets with gross substitute utilities for the agents. Moreover, it can be pinned down to e1/e ≈ 1.445 in Cobb-Douglas markets. For the Leontief markets in which products are complementary, we show that the incentive ratio is at most two as well. {\textcopyright} 2022 The Author(s).",

keywords = "Fisher market, Incentive ratio, Market equilibrium",

author = "Ning Chen and Xiaotie Deng and Bo Tang and Hongyang Zhang and Jie Zhang",

year = "2022",

month = may,

doi = "10.1016/j.ic.2022.104875",

language = "English",

volume = "285",

journal = "Information and Computation",

issn = "0890-5401",

publisher = "Elsevier Inc.",

number = "Part B",

}

TY - JOUR

T1 - Incentive ratio

T2 - A game theoretical analysis of market equilibria

AU - Chen, Ning

AU - Deng, Xiaotie

AU - Tang, Bo

AU - Zhang, Hongyang

AU - Zhang, Jie

PY - 2022/5

Y1 - 2022/5

N2 - In a Fisher market, the market maker sells m products to n potential agents. The agents submit their utility functions and money endowments to the market maker, who, upon receiving submitted information, derives market equilibrium prices and allocations of the products. Agents are self-interested entities who wish to maximize their utility, and they may misreport their private information for this purpose. The incentive ratio characterizes the extent to which strategic plays can increase an agent's utility. While agents do benefit by misreporting their private information, we show that the ratio of improvement by a unilateral strategic play is no more than two in markets with gross substitute utilities for the agents. Moreover, it can be pinned down to e1/e ≈ 1.445 in Cobb-Douglas markets. For the Leontief markets in which products are complementary, we show that the incentive ratio is at most two as well. © 2022 The Author(s).

AB - In a Fisher market, the market maker sells m products to n potential agents. The agents submit their utility functions and money endowments to the market maker, who, upon receiving submitted information, derives market equilibrium prices and allocations of the products. Agents are self-interested entities who wish to maximize their utility, and they may misreport their private information for this purpose. The incentive ratio characterizes the extent to which strategic plays can increase an agent's utility. While agents do benefit by misreporting their private information, we show that the ratio of improvement by a unilateral strategic play is no more than two in markets with gross substitute utilities for the agents. Moreover, it can be pinned down to e1/e ≈ 1.445 in Cobb-Douglas markets. For the Leontief markets in which products are complementary, we show that the incentive ratio is at most two as well. © 2022 The Author(s).

KW - Fisher market

KW - Incentive ratio

KW - Market equilibrium

UR - https://www.scopus.com/pages/publications/85125516396

UR - https://www.scopus.com/pages/publications/85125516396#tab=impact

U2 - 10.1016/j.ic.2022.104875

DO - 10.1016/j.ic.2022.104875

M3 - RGC 21 - Publication in refereed journal

SN - 0890-5401

VL - 285

JO - Information and Computation

JF - Information and Computation

IS - Part B

M1 - 104875

ER -

Incentive ratio: A game theoretical analysis of market equilibria

Abstract

Funding

Research Keywords

Publisher's Copyright Statement

Access Output

Other Access Options

Permanent Link

Other Files and Links

Fingerprint

Cite this