On the Relationship between the VCG Mechanism and Market Clearing

Takashi Tanaka; Na Li; Kenko Uchida

doi:10.23919/ACC.2018.8430852

On the Relationship between the VCG Mechanism and Market Clearing

Takashi Tanaka, Na Li, Kenko Uchida

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

8 Citations (Scopus)

Abstract

We consider a social cost minimization problem with equality and inequality constraints in which a central coordinator allocates infinitely divisible goods to self-interested N firms under information asymmetry. We consider the Vickrey-Clarke-Groves (VCG) mechanism and study its connection to an alternative mechanism based on market clearing-price. Under the considered set up, we show that the VCG payments are equal to the path integrals of the vector field of the market clearing prices, indicating a close relationship between the VCG mechanism and the 'clearing-price' mechanism. We then discuss its implications for the electricity market design and also exploit this connection to analyze the budget balance of the VCG mechanism.

Original language	English
Title of host publication	2018 Annual American Control Conference, ACC 2018
Publisher	Institute of Electrical and Electronics Engineers Inc.
Pages	4597-4603
Number of pages	7
Volume	2018-June
ISBN (Print)	9781538654286
DOIs	https://doi.org/10.23919/ACC.2018.8430852
Publication status	Published - 2018 Aug 9
Event	2018 Annual American Control Conference, ACC 2018 - Milwauke, United States Duration: 2018 Jun 27 → 2018 Jun 29

Other

Other	2018 Annual American Control Conference, ACC 2018
Country/Territory	United States
City	Milwauke
Period	18/6/27 → 18/6/29

ASJC Scopus subject areas

Electrical and Electronic Engineering

Access to Document

10.23919/ACC.2018.8430852

Cite this

Tanaka, T, Li, N & Uchida, K 2018, On the Relationship between the VCG Mechanism and Market Clearing. in 2018 Annual American Control Conference, ACC 2018. vol. 2018-June, 8430852, Institute of Electrical and Electronics Engineers Inc., pp. 4597-4603, 2018 Annual American Control Conference, ACC 2018, Milwauke, United States, 18/6/27. https://doi.org/10.23919/ACC.2018.8430852

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N2 - We consider a social cost minimization problem with equality and inequality constraints in which a central coordinator allocates infinitely divisible goods to self-interested N firms under information asymmetry. We consider the Vickrey-Clarke-Groves (VCG) mechanism and study its connection to an alternative mechanism based on market clearing-price. Under the considered set up, we show that the VCG payments are equal to the path integrals of the vector field of the market clearing prices, indicating a close relationship between the VCG mechanism and the 'clearing-price' mechanism. We then discuss its implications for the electricity market design and also exploit this connection to analyze the budget balance of the VCG mechanism.

AB - We consider a social cost minimization problem with equality and inequality constraints in which a central coordinator allocates infinitely divisible goods to self-interested N firms under information asymmetry. We consider the Vickrey-Clarke-Groves (VCG) mechanism and study its connection to an alternative mechanism based on market clearing-price. Under the considered set up, we show that the VCG payments are equal to the path integrals of the vector field of the market clearing prices, indicating a close relationship between the VCG mechanism and the 'clearing-price' mechanism. We then discuss its implications for the electricity market design and also exploit this connection to analyze the budget balance of the VCG mechanism.

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BT - 2018 Annual American Control Conference, ACC 2018

PB - Institute of Electrical and Electronics Engineers Inc.

T2 - 2018 Annual American Control Conference, ACC 2018

Y2 - 27 June 2018 through 29 June 2018

ER -

On the Relationship between the VCG Mechanism and Market Clearing

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