The Effects of Latency on a Progressive Second-Price Auction

Abstract: The progressive second-price auction of Lazar and Semret is a decentralized mechanism for the allocation and real-time pricing of a divisible resource. Our focus is on how delays in the receipt of bid messages, asynchronous analysis by buyers of the market and randomness in the initial bids affect the $\varepsilon$-Nash equilibria obtained by the method of truthful $\varepsilon$-best reply. We introduce an algorithm for finding minimal-revenue equilibrium states and then show that setting a reserve price just below clearing stabilizes seller revenue while maintaining efficiency. Utility is of primary interest given the assumption of elastic demand. Although some buyers experienced unpredictability in the value and cost of their individual allocations, their respective utilities were predictable.