Online double auction mechanism for perishable goods

• We investigate mechanism design for a spot market of perishable goods.
• We explain that failures of trading in the perishable goods damage social utility.
• We develop an online double auction that prioritizes time-critical bids.
• Multiagent simulations show the auction realizes efficient and fair allocations.

One-sided auctions are used for market clearing in the spot markets for perishable goods because production cost in spot markets is already “sunk.” Moreover, the promptness and simplicity of one-sided auctions are beneficial for trading in perishable goods. However, sellers cannot participate in the price-making process in these auctions. A standard double auction market collects bids from traders and matches the higher bids of buyers and lower bids of sellers to find the most efficient allocation, assuming that the value of unsold items remains unchanged. Nevertheless, in the market for perishable goods, sellers suffer a loss when they fail to sell their goods, because their salvage values are lost when the goods perish. To solve this problem, we investigate the suitable design of an online double auction for perishable goods, where bids arrive dynamically with their time limits. Our market mechanism aims at improving the profitability of traders by reducing trade failures in the face of uncertainty of incoming/departing bids. We develop a heuristic market mechanism with an allocation policy that prioritizes bids of traders based on their time-criticality, and evaluate its performance experimentally using multi-agent simulation. We find out that our market mechanism realizes efficient and fair allocations among traders with approximately truthful behavior in different market situations.