Efficient Market Mechanisms for Network Resource Allocation

We study the interaction between buyers and sellers of several indivisible goods (or items). A buyer wants a combination of items while each seller offers only one type of item. The setting is motivated by communication networks in which buyers want to construct routes using several links and sellers offer transmission capacity on individual links. Agents are strategic and may not be truthful, so a competitive equilibrium may not be realized. To ensure a good outcome among strategic agents, we propose a combinatorial double auction. We show that a Nash equilibrium exists for the associated game with complete information, and more surprisingly, the resulting allocation is efficient. We then consider competitive analysis in the continuum model of the auction setting and show that the auction outcome is a competitive equilibrium.