Large market games with near optimal efficiency

As is well known, many classes of markets have efficient equilibria, but this depends on agents being non-strategic, i.e. that they declare their true demands when offered goods at particular prices, or in other words, that they are price-takers. An important question is how much the equilibria degrade in the face of strategic behavior, i.e. what is the Price of Anarchy (PoA) of the market viewed as a mechanism? Often, PoA bounds are modest constants such as -4/3 or 2. Nonetheless, in practice a guarantee that no more than 25% or 50% of the economic value is lost may be unappealing. This paper asks whether significantly better bounds are possible under plausible assumptions. In particular, we look at how these worst case guarantees improve in the following large settings. - Large Walrasian auctions: These are auctions with many copies of each item and many agents. We show that the PoA tends to 1 as the market size increases, under suitable conditions, mainly that there is some uncertainty about the numbers of copies of each good and demands obey the gross substitutes condition. We also note that some such assumption is unavoidable. - Large Fisher markets: Fisher markets are a class of economies that has received considerable attention in the computer science literature. A large market is one in which at equilibrium, each buyer makes only a small fraction of the total purchases; the smaller the fraction, the larger the market. Here the main condition is that demands are based on homogeneous monotone utility functions that satisfy the gross substitutes condition. Again, the PoA tends to 1 as the market size increases. Furthermore, in each setting, we quantify the tradeoff between market size and the PoA.