The auction house isn't broke... so don't try to fix it.
What you all after is more like a trade outpost...
Say I list an item up for trade, instead of listing it with a price, it becomes available for people to submit offers..
Say Person A sees my item up for trade, he can "place a offer/bid" which will take him into his inv and he can select 4 different items and or gold to "offer/bid" on the said item.
Person A items then become locked into that "offer/bid" until Ive chosen to accept or decline.
At the same time Person B could come along and make a similar "bid/offer" on my post like Person A has done, so could Person C, etc.
Now I would have multiple different "offers/bids" to choose from and if for example, I choose Person Bs "offer/bid" then Person A and Person C would have their items/gold unlocked/returned to them as theirs wasn't accepted.
Probably wouldn't be the easiest to implement with coding etc (I'm not that technical) however based on the ideas people are trying to spitball, this solution is going to be your best one.
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**edit**
Also you can add say a listing fee for me to post a item on the "trade outpost" which is also higher then the fees in the AH to detire people smalling small trades and just like the AH you can choose to have a post stay up for a length of time for different fees like 1 day - 3 days - 7 days and if the post hasn't had any offers or gets accepted, it becomes expired again like how the AH works
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