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2014 Price of Fairness on Networked Auctions
Mariusz Kaleta
J. Appl. Math. 2014(SI08): 1-7 (2014). DOI: 10.1155/2014/860747

Abstract

We consider an auction design problem under network flow constraints. We focus on pricing mechanisms that provide fair solutions, where fairness is defined in absolute and relative terms. The absolute fairness is equivalent to “no individual losses” assumption. The relative fairness can be verbalized as follows: no agent can be treated worse than any other in similar circumstances. Ensuring the fairness conditions makes only part of the social welfare available in the auction to be distributed on pure market rules. The rest of welfare must be distributed without market rules and constitutes the so-called price of fairness. We prove that there exists the minimum of price of fairness and that it is achieved when uniform unconstrained market price is used as the base price. The price of fairness takes into account costs of forced offers and compensations for lost profits. The final payments can be different than locational marginal pricing. That means that the widely applied locational marginal pricing mechanism does not in general minimize the price of fairness.

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Mariusz Kaleta. "Price of Fairness on Networked Auctions." J. Appl. Math. 2014 (SI08) 1 - 7, 2014. https://doi.org/10.1155/2014/860747

Information

Published: 2014
First available in Project Euclid: 1 October 2014

zbMATH: 07131934
MathSciNet: MR3240639
Digital Object Identifier: 10.1155/2014/860747

Rights: Copyright © 2014 Hindawi

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Vol.2014 • No. SI08 • 2014
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