Equitable Marketplace Mechanism Design
- URL: http://arxiv.org/abs/2209.15418v1
- Date: Thu, 22 Sep 2022 20:03:34 GMT
- Title: Equitable Marketplace Mechanism Design
- Authors: Kshama Dwarakanath, Svitlana S Vyetrenko, Tucker Balch
- Abstract summary: We study a trading marketplace populated by traders with diverse trading strategies and objectives.
The goal of this work is to design a dynamic fee schedule for the marketplace that is equitable and profitable to all traders.
We present a reinforcement learning framework for simultaneously learning a marketplace fee schedule and trading strategies.
- Score: 0.0
- License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
- Abstract: We consider a trading marketplace that is populated by traders with diverse
trading strategies and objectives. The marketplace allows the suppliers to list
their goods and facilitates matching between buyers and sellers. In return,
such a marketplace typically charges fees for facilitating trade. The goal of
this work is to design a dynamic fee schedule for the marketplace that is
equitable and profitable to all traders while being profitable to the
marketplace at the same time (from charging fees). Since the traders adapt
their strategies to the fee schedule, we present a reinforcement learning
framework for simultaneously learning a marketplace fee schedule and trading
strategies that adapt to this fee schedule using a weighted optimization
objective of profits and equitability. We illustrate the use of the proposed
approach in detail on a simulated stock exchange with different types of
investors, specifically market makers and consumer investors. As we vary the
equitability weights across different investor classes, we see that the learnt
exchange fee schedule starts favoring the class of investors with the highest
weight. We further discuss the observed insights from the simulated stock
exchange in light of the general framework of equitable marketplace mechanism
design.
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