Electronic service matching: Failure of incentive compatibility in Vickrey auctions

We consider pricing schemes for matching customers and providers on double-sided markets for electronic services. While existing second-best solutions are incentive compatible, the associated payment functions are difficult to implement in real-world settings. Based on the Vickrey–Clarke–Groves (VCG) and the k -pricing mechanism, we propose two straightforward payment schemes that offer a practical alternative to the second-best solution. Our experiments provide evidence that the VCG payments fail to implement incentive compatibility. This failure is due to the interdependency of the participants’ utilities.