Best-response dynamics in combinatorial auctions with item bidding

In a combinatorial auction with item bidding, agents participate in multiple single-item second-price auctions at once. As some items might be substitutes, agents need to strate- gize in order to maximize their utilities. A number of results indicate that high welfare can be achieved this way, giving bounds on the welfare at equilibrium. Recently, however, criticism has been raised that equilibria are hard to compute and therefore unlikely to be attained. In this paper, we take a different perspective. We study simple best-response dynamics. That is, agents are activated one after the other and each activated agent updates his strategy myopically to a best response against the other agents’ current strategies. Often these dynamics may take exponentially long before they converge or they may not converge at all. However, as we show, convergence is not even necessary for good welfare guarantees. Given that agents’ bid updates are aggressive enough but not too aggressive, the game will remain in states of good welfare after each agent has updated his bid at least once. In more detail, we show that if agents have fractionally subadditive valuations, natural dynamics reach and remain in a state that provides a 1/3 approximation to the optimal welfare after each agent has updated his bid at least once. For subadditive valuations, we can guarantee an Ω(1/log m) approximation in case of m items that applies after each agent has updated his bid at least once and at any point after that. The latter bound is complemented by a negative result, showing that no kind of best-response dynamics can guarantee more than a an o(log log m/ log m) fraction of the optimal social welfare

Combinatorial Auctions Do Need Modest Interaction

We study the necessity of interaction for obtaining efficient allocations in subadditive combinatorial auctions. This problem was originally introduced by Dobzinski, Nisan, and Oren (STOC'14) as the following simple market scenario: $m$ items are to be allocated among $n$ bidders in a distributed setting where bidders valuations are private and hence communication is needed to obtain an efficient allocation. The communication happens in rounds: in each round, each bidder, simultaneously with others, broadcasts a message to all parties involved and the central planner computes an allocation solely based on the communicated messages. Dobzinski et.al. showed that no non-interactive ($1$-round) protocol with polynomial communication (in the number of items and bidders) can achieve approximation ratio better than $\Omega(m^{{1}/{4}})$, while for any $r \geq 1$, there exists $r$-round protocols that achieve $\widetilde{O}(r \cdot m^{{1}/{r+1}})$ approximation with polynomial communication; in particular, $O(\log{m})$ rounds of interaction suffice to obtain an (almost) efficient allocation. A natural question at this point is to identify the "right" level of interaction (i.e., number of rounds) necessary to obtain an efficient allocation. In this paper, we resolve this question by providing an almost tight round-approximation tradeoff for this problem: we show that for any $r \geq 1$, any $r$-round protocol that uses polynomial communication can only approximate the social welfare up to a factor of $\Omega(\frac{1}{r} \cdot m^{{1}/{2r+1}})$. This in particular implies that $\Omega(\frac{\log{m}}{\log\log{m}})$ rounds of interaction are necessary for obtaining any efficient allocation in these markets. Our work builds on the recent multi-party round-elimination technique of Alon, Nisan, Raz, and Weinstein (FOCS'15) and settles an open question posed by Dobzinski et.al. and Alon et. al

A Bridge between Liquid and Social Welfare in Combinatorial Auctions with Submodular Bidders

We study incentive compatible mechanisms for Combinatorial Auctions where the bidders have submodular (or XOS) valuations and are budget-constrained. Our objective is to maximize the \emph{liquid welfare}, a notion of efficiency for budget-constrained bidders introduced by Dobzinski and Paes Leme (2014). We show that some of the known truthful mechanisms that best-approximate the social welfare for Combinatorial Auctions with submodular bidders through demand query oracles can be adapted, so that they retain truthfulness and achieve asymptotically the same approximation guarantees for the liquid welfare. More specifically, for the problem of optimizing the liquid welfare in Combinatorial Auctions with submodular bidders, we obtain a universally truthful randomized $O(\log m)$-approximate mechanism, where $m$ is the number of items, by adapting the mechanism of Krysta and V\"ocking (2012). Additionally, motivated by large market assumptions often used in mechanism design, we introduce a notion of competitive markets and show that in such markets, liquid welfare can be approximated within a constant factor by a randomized universally truthful mechanism. Finally, in the Bayesian setting, we obtain a truthful $O(1)$-approximate mechanism for the case where bidder valuations are generated as independent samples from a known distribution, by adapting the results of Feldman, Gravin and Lucier (2014).Comment: AAAI-1

Proportional Dynamics in Exchange Economies

We study the Proportional Response dynamic in exchange economies, where each player starts with some amount of money and a good. Every day, the players bring one unit of their good and submit bids on goods they like, each good gets allocated in proportion to the bid amounts, and each seller collects the bids received. Then every player updates the bids proportionally to the contribution of each good in their utility. This dynamic models a process of learning how to bid and has been studied in a series of papers on Fisher and production markets, but not in exchange economies. Our main results are as follows: - For linear utilities, the dynamic converges to market equilibrium utilities and allocations, while the bids and prices may cycle. We give a combinatorial characterization of limit cycles for prices and bids. - We introduce a lazy version of the dynamic, where players may save money for later, and show this converges in everything: utilities, allocations, and prices. - For CES utilities in the substitute range $[0,1)$, the dynamic converges for all parameters. This answers an open question about exchange economies with linear utilities, where tatonnement does not converge to market equilibria, and no natural process leading to equilibria was known. We also note that proportional response is a process where the players exchange goods throughout time (in out-of-equilibrium states), while tatonnement only explains how exchange happens in the limit.Comment: 25 pages, 6 figure

Best-response dynamics in combinatorial auctions with item bidding

In a combinatorial auction with item bidding, agents participate in multiple single-item second-price auctions at once. As some items might be substitutes, agents need to strategize in order to maximize their utilities. A number of results indicate that high social welfare can be achieved this way, giving bounds on the welfare at equilibrium. Recently, however, criticism has been raised that equilibria of this game are hard to compute and therefore unlikely to be attained. In this paper, we take a different perspective by studying simple best-response dynamics. Often these dynamics may take exponentially long before they converge or they may not converge at all. However, as we show, convergence is not even necessary for good welfare guarantees. Given that agents’ bid updates are aggressive enough but not too aggressive, the game will reach and remain in states of high welfare after each agent has updated his bid at least once