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A Double Auction Model based on Nonlinear Utility Functions : Genetic Algorithms Approach for Market Optimization  

Choi, Jin-Ho (세종대학교 경영학부)
Ahn, Hyun-Chul (성신여자대학교 사회과학대학 경영학과)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.33, no.1, 2008 , pp. 19-33 More about this Journal
Abstract
In the previous double auction research for the market optimization, two basic assumptions are usually applied - (1) each trader has a linear or quasi-linear utility function of price and quantity, and (2) buyers as well as sellers have identical utility functions. However, in practice, each buyer and seller in a double auction market may have diverse utility functions for trading goods. Therefore, a flexible and integrated double auction mechanism that can integrate all traders' diverse utility functions is necessary. In particular, the flexible mechanism is more useful in a synchronous double auction because traders can properly change utilities in each round. Therefore, in this paper, we propose a flexible synchronous double auction mechanism in which traders can express diverse utility functions for the price and quantity of the goods, and optimal total market utility is guaranteed. In order to optimize the total market utility which consists of multiple complex utility functions of traders. We show the viability of the proposed mechanism through a several simulation experiments.
Keywords
Double Auction; Utility Theory; Genetic Algorithm; Optimization;
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