85 research outputs found
Third-Party Data Providers Ruin Simple Mechanisms
Motivated by the growing prominence of third-party data providers in online
marketplaces, this paper studies the impact of the presence of third-party data
providers on mechanism design. When no data provider is present, it has been
shown that simple mechanisms are "good enough" -- they can achieve a constant
fraction of the revenue of optimal mechanisms. The results in this paper
demonstrate that this is no longer true in the presence of a third-party data
provider who can provide the bidder with a signal that is correlated with the
item type. Specifically, even with a single seller, a single bidder, and a
single item of uncertain type for sale, the strategies of pricing each
item-type separately (the analog of item pricing for multi-item auctions) and
bundling all item-types under a single price (the analog of grand bundling) can
both simultaneously be a logarithmic factor worse than the optimal revenue.
Further, in the presence of a data provider, item-type partitioning
mechanisms---a more general class of mechanisms which divide item-types into
disjoint groups and offer prices for each group---still cannot achieve within a
factor of the optimal revenue. Thus, our results highlight that the
presence of a data-provider forces the use of more complicated mechanisms in
order to achieve a constant fraction of the optimal revenue
Computer-aided verification in mechanism design
In mechanism design, the gold standard solution concepts are dominant
strategy incentive compatibility and Bayesian incentive compatibility. These
solution concepts relieve the (possibly unsophisticated) bidders from the need
to engage in complicated strategizing. While incentive properties are simple to
state, their proofs are specific to the mechanism and can be quite complex.
This raises two concerns. From a practical perspective, checking a complex
proof can be a tedious process, often requiring experts knowledgeable in
mechanism design. Furthermore, from a modeling perspective, if unsophisticated
agents are unconvinced of incentive properties, they may strategize in
unpredictable ways.
To address both concerns, we explore techniques from computer-aided
verification to construct formal proofs of incentive properties. Because formal
proofs can be automatically checked, agents do not need to manually check the
properties, or even understand the proof. To demonstrate, we present the
verification of a sophisticated mechanism: the generic reduction from Bayesian
incentive compatible mechanism design to algorithm design given by Hartline,
Kleinberg, and Malekian. This mechanism presents new challenges for formal
verification, including essential use of randomness from both the execution of
the mechanism and from the prior type distributions. As an immediate
consequence, our work also formalizes Bayesian incentive compatibility for the
entire family of mechanisms derived via this reduction. Finally, as an
intermediate step in our formalization, we provide the first formal
verification of incentive compatibility for the celebrated
Vickrey-Clarke-Groves mechanism
The Role of Randomness and Noise in Strategic Classification
We investigate the problem of designing optimal classifiers in the strategic
classification setting, where the classification is part of a game in which
players can modify their features to attain a favorable classification outcome
(while incurring some cost). Previously, the problem has been considered from a
learning-theoretic perspective and from the algorithmic fairness perspective.
Our main contributions include 1. Showing that if the objective is to maximize
the efficiency of the classification process (defined as the accuracy of the
outcome minus the sunk cost of the qualified players manipulating their
features to gain a better outcome), then using randomized classifiers (that is,
ones where the probability of a given feature vector to be accepted by the
classifier is strictly between 0 and 1) is necessary. 2. Showing that in many
natural cases, the imposed optimal solution (in terms of efficiency) has the
structure where players never change their feature vectors (the randomized
classifier is structured in a way, such that the gain in the probability of
being classified as a 1 does not justify the expense of changing one's
features). 3. Observing that the randomized classification is not a stable
best-response from the classifier's viewpoint, and that the classifier doesn't
benefit from randomized classifiers without creating instability in the system.
4. Showing that in some cases, a noisier signal leads to better equilibria
outcomes -- improving both accuracy and fairness when more than one
subpopulation with different feature adjustment costs are involved. This is
interesting from a policy perspective, since it is hard to force institutions
to stick to a particular randomized classification strategy (especially in a
context of a market with multiple classifiers), but it is possible to alter the
information environment to make the feature signals inherently noisier.Comment: 22 pages. Appeared in FORC, 202
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