The Power of Recruiting the Smaller Side: Two Additional Traders Suffice in Two-Sided Markets

We study Bulow-Klemperer-style competition complexity in two-sided double auctions with m unit-demand buyers drawn i.i.d. from FB and n unit-supply sellers drawn i.i.d. from FS. When m ≥ n and buyer valuations first-order stochastically dominate seller costs (FB succeqFSD FS), we prove that recruiting just two additional sellers enables Seller Trade Reduction (STR), a prior-independent mechanism, to achieve expected Gains From Trade (GFT) at least the first-best GFT of the original market. When the buyer side is the smaller side of the market (m ≤ n), an analogous result holds for Buyer Trade Reduction with 2 additional buyers. This resolves open questions of Babaioff, Goldner, and Gonczarowski (SODA 2020) and Cai, Liaw, Mehta, and Zhao (STOC 2024). We complement our upper bound by showing that this uniform bound is optimal: already for m = n = 1, no prior-free mechanism (deterministic or randomized) that is dominant-strategy incentive-compatible, individually rational, and weakly budget-balanced can match the first-best GFT by recruiting only one additional seller.