On the Relationship between the VCG Mechanism and Market Clearing

Takashi Tanaka, Na Li, Kenko Uchida

    Research output: Chapter in Book/Report/Conference proceedingConference contribution

    3 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 languageEnglish
    Title of host publication2018 Annual American Control Conference, ACC 2018
    PublisherInstitute of Electrical and Electronics Engineers Inc.
    Pages4597-4603
    Number of pages7
    Volume2018-June
    ISBN (Print)9781538654286
    DOIs
    Publication statusPublished - 2018 Aug 9
    Event2018 Annual American Control Conference, ACC 2018 - Milwauke, United States
    Duration: 2018 Jun 272018 Jun 29

    Other

    Other2018 Annual American Control Conference, ACC 2018
    CountryUnited States
    CityMilwauke
    Period18/6/2718/6/29

    ASJC Scopus subject areas

    • Electrical and Electronic Engineering

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  • 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, pp. 4597-4603). [8430852] Institute of Electrical and Electronics Engineers Inc.. https://doi.org/10.23919/ACC.2018.8430852