Do hard budget constraints work in favour or against truth telling in double auctions? McAfee (1992) constructed a simple double auction mechanism (MDA), which is strategyproof and minimally inefficient, but… Click to show full abstract
Do hard budget constraints work in favour or against truth telling in double auctions? McAfee (1992) constructed a simple double auction mechanism (MDA), which is strategyproof and minimally inefficient, but may resort to dual prices, where the difference between prices is channelled as a surplus to the market maker, preventing MDA from achieving a balanced budget. We construct a variant of MDA in which no-loss constraints play a major positive role. Our variant of MDA is also strategyproof, as efficient as MDA but improves on it by achieving a balanced budget via always having a uniform price.
               
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