Double auction

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A double auction is a process of buying and selling goods with multiple sellers and multiple buyers.^[1] Potential buyers submit their bids and potential sellers submit their ask prices to the market institution, and then the market institution chooses some price p that clears the market: all the sellers who asked less than p sell and all buyers who bid more than p buy at this price p. Buyers and sellers that bid or ask for exactly p are also included. A common example of a double auction is stock exchange.

As well as their direct interest, double auctions are reminiscent of Walrasian auction and have been used as a tool to study the determination of prices in ordinary markets. A double auction is also possible without any exchange of currency in barter trade. A barter double auction is an auction where every participant has a demand and an offer consisting of multiple attributes and no money is involved.^[2] For the mathematical modelling of satisfaction level Euclidean distance is used, where the offer and demand are treated as vectors.

A simple example of a double auction is a bilateral trade scenario, in which there is a single seller who values his product as S (e.g. the cost of producing the product), and a single buyer who values that product as B.