The Optimality of a Simple Market Mechanism
Strategic behavior in a finite market can cause inefficiency in the allocation, and market mechanisms differ in how successfully they limit this inefficiency. A method for ranking algorithms in computer science is adapted here to rank market mechanisms according to how quickly inefficiency diminishes as the size of the market increases. It is shown that trade at a single market-clearing price in the "k"-double auction is "worst-case asymptotic optimal" among all plausible…