Wednesday, October 10, 2012

Privacy of auction bids

Steve Leider writes:

I came on an interesting market design anecdote in a larger article about cryptography (, and I found out more details here (

The basic story is that all the production of sugar beets in Denmark get sold to a monopsonist firm Danisco, and at the start of the year each farmer buys rights to sell a certain quantity of beets to Danisco at harvest, based on their production estimates.  Often when harvest comes farmers end up wanting to buy or sell rights, however in the past this has been difficult to do in a centralized fashion because a double auction for rights would reveal too much information to Danisco and enhance its bargaining power versus the farmer's association.  Recently they instituted a system where they could essentially submit their bids in encrypted form to an algorithm that can compute the market clearing price and exchanges without needing to decrypt individual bids.


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