Combinatorial Information Market Design
Information Systems Frontiers
Elements of Information Theory (Wiley Series in Telecommunications and Signal Processing)
Elements of Information Theory (Wiley Series in Telecommunications and Signal Processing)
Online algorithms for market clearing
Journal of the ACM (JACM)
Complexity of combinatorial market makers
Proceedings of the 9th ACM conference on Electronic commerce
The effects of market-making on price dynamics
Proceedings of the 7th international joint conference on Autonomous agents and multiagent systems - Volume 2
Information aggregation in dynamic markets with strategic traders
Proceedings of the 10th ACM conference on Electronic commerce
A unified framework for dynamic pari-mutuel information market design
Proceedings of the 10th ACM conference on Electronic commerce
Chain: a dynamic double auction framework for matching patient agents
Journal of Artificial Intelligence Research
Pari-mutuel markets: mechanisms and performance
WINE'07 Proceedings of the 3rd international conference on Internet and network economics
A new understanding of prediction markets via no-regret learning
Proceedings of the 11th ACM conference on Electronic commerce
Automated market-making in the large: the gates hillman prediction market
Proceedings of the 11th ACM conference on Electronic commerce
When do markets with simple agents fail?
Proceedings of the 9th International Conference on Autonomous Agents and Multiagent Systems: volume 1 - Volume 1
An optimization-based framework for automated market-making
Proceedings of the 12th ACM conference on Electronic commerce
Liquidity-sensitive automated market makers via homogeneous risk measures
WINE'11 Proceedings of the 7th international conference on Internet and Network Economics
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Automated market makers are algorithmic agents that enable participation and information elicitation in electronic markets. They have been widely and successfully applied in artificial-money settings, like some Internet prediction markets. Automated market makers from the literature suffer from two problems that contribute to their impracticality and impair their use beyond artificial-money settings: first, they are unable to adapt to liquidity, so that trades cause prices to move the same amount in both heavily and lightly traded markets, and second, in typical circumstances, they run at a deficit. In this article, we construct a market maker that is both sensitive to liquidity and can run at a profit. Our market maker has bounded loss for any initial level of liquidity and, as the initial level of liquidity approaches zero, worst-case loss approaches zero. For any level of initial liquidity we can establish a boundary in market state space such that, if the market terminates within that boundary, the market maker books a profit regardless of the realized outcome.