A Nash Equilibrium Solution for Periodic Double Auctions

Abstract: We consider a periodic double auction (PDA) setting where buyers of the auction have multiple (but finite) opportunities to procure multiple but fixed units of a commodity. The goal of each buyer participating in such auctions is to reduce their cost of procurement by planning their purchase across multiple rounds of the PDA. Formulating such optimal bidding strategies in a multi-agent periodic double auction setting is a challenging problem as such strategies involve planning across current and future auctions. In this work, we consider one such setup wherein the composite supply curve is known to all buyers. Specifically, for the complete information setting, we model the PDA as a Markov game and derive Markov perfect Nash equilibrium (MPNE) solution to devise an optimal bidding strategy for the case when each buyer is allowed to make one bid per round of the PDA. Thereafter, the efficacy of the Nash policies obtained is demonstrated with numerical experiments.