A market-affected sealed-bid auction protocol

Multiagent resource allocation defines the issue of having to distribute a set of resources among a set of agents, aiming at a fair and efficient allocation. Resource allocation procedures can be evaluated with regard to properties such as budget balance and strategy-proofness. Designing a budget-balanced and strategy-proof allocation procedure that always provides a fair (namely, envy-free) and efficient (namely, Pareto-optimal) allocation poses a true challenge. To the best of our knowledge, none of the existing procedures combines all four properties. Moreover, in previous literature no attention is given to the allocation of unwanted resources (i.e., resources that seem to be of no use for all agents) in a way as to maximize social welfare. Yet, dealing inappropriately with unwanted resources may decrease each agent's benefit. Therefore, we extend the scope of sealed-bid auctions by means of involving market prices so as to always provide an optimal solution under consideration of each agent's preferences. We present a new market-affected sealed-bid auction protocol (MSAP) where agents submit sealed bids on indivisible resources, and we allow monetary side-payments. We show this protocol to be budget-balanced and weakly strategy-proof, and to always provide an allocation that maximizes both utilitarian and egalitarian social welfare, and is envy-free and Pareto-optimal. © Springer-Verlag Berlin Heidelberg 2010.