Evolutionary Optimization of ZIP60: A Controlled Explosion in Hyperspace

The “ZIP” adaptive trading algorithm has been demonstrated to out-perform human traders in experimental studies of continuous double auction (CDA) markets. The original ZIP algorithm requires the values of eight control parameters to be set correctly. A new extension of the ZIP algorithm, called ZIP60, requires the values of 60 parameters to be set correctly. ZIP60 is shown here to produce significantly better results than the original ZIP (called “ZIP8” hereafter), for negligable additional computational costs. A genetic algorithm (GA) is used to search the 60-dimensional ZIP60 parameter space, and it finds parameter vectors that yield ZIP60 traders with mean scores significantly better than those of ZIP8s. This paper shows that the optimizing evolutionary search works best when the GA itself controls the dimensionality of the search-space, so that the search commences in an 8-d space and thereafter the dimensionality of the search-space is gradually increased by the GA until it is exploring a 60-d space. Furthermore, the results from ZIP60 cast some doubt on prior ZIP8 results concerning the evolution of new ‘hybrid’ auction mechanisms that appeared to be better than the CDA

Budget Constrained Auctions with Heterogeneous Items

In this paper, we present the first approximation algorithms for the problem of designing revenue optimal Bayesian incentive compatible auctions when there are multiple (heterogeneous) items and when bidders can have arbitrary demand and budget constraints. Our mechanisms are surprisingly simple: We show that a sequential all-pay mechanism is a 4 approximation to the revenue of the optimal ex-interim truthful mechanism with discrete correlated type space for each bidder. We also show that a sequential posted price mechanism is a O(1) approximation to the revenue of the optimal ex-post truthful mechanism when the type space of each bidder is a product distribution that satisfies the standard hazard rate condition. We further show a logarithmic approximation when the hazard rate condition is removed, and complete the picture by showing that achieving a sub-logarithmic approximation, even for regular distributions and one bidder, requires pricing bundles of items. Our results are based on formulating novel LP relaxations for these problems, and developing generic rounding schemes from first principles. We believe this approach will be useful in other Bayesian mechanism design contexts.Comment: Final version accepted to STOC '10. Incorporates significant reviewer comment

Computational Mechanism Design: A Call to Arms

Game theory has developed powerful tools for analyzing decision making in systems with multiple autonomous actors. These tools, when tailored to computational settings, provide a foundation for building multiagent software systems. This tailoring gives rise to the field of computational mechanism design, which applies economic principles to computer systems design

Profitable Task Allocation in Mobile Cloud Computing

We propose a game theoretic framework for task allocation in mobile cloud computing that corresponds to offloading of compute tasks to a group of nearby mobile devices. Specifically, in our framework, a distributor node holds a multidimensional auction for allocating the tasks of a job among nearby mobile nodes based on their computational capabilities and also the cost of computation at these nodes, with the goal of reducing the overall job completion time. Our proposed auction also has the desired incentive compatibility property that ensures that mobile devices truthfully reveal their capabilities and costs and that those devices benefit from the task allocation. To deal with node mobility, we perform multiple auctions over adaptive time intervals. We develop a heuristic approach to dynamically find the best time intervals between auctions to minimize unnecessary auctions and the accompanying overheads. We evaluate our framework and methods using both real world and synthetic mobility traces. Our evaluation results show that our game theoretic framework improves the job completion time by a factor of 2-5 in comparison to the time taken for executing the job locally, while minimizing the number of auctions and the accompanying overheads. Our approach is also profitable for the nearby nodes that execute the distributor's tasks with these nodes receiving a compensation higher than their actual costs

An Investigation Report on Auction Mechanism Design

Auctions are markets with strict regulations governing the information available to traders in the market and the possible actions they can take. Since well designed auctions achieve desirable economic outcomes, they have been widely used in solving real-world optimization problems, and in structuring stock or futures exchanges. Auctions also provide a very valuable testing-ground for economic theory, and they play an important role in computer-based control systems. Auction mechanism design aims to manipulate the rules of an auction in order to achieve specific goals. Economists traditionally use mathematical methods, mainly game theory, to analyze auctions and design new auction forms. However, due to the high complexity of auctions, the mathematical models are typically simplified to obtain results, and this makes it difficult to apply results derived from such models to market environments in the real world. As a result, researchers are turning to empirical approaches. This report aims to survey the theoretical and empirical approaches to designing auction mechanisms and trading strategies with more weights on empirical ones, and build the foundation for further research in the field

Efficiency Guarantees in Auctions with Budgets

In settings where players have a limited access to liquidity, represented in the form of budget constraints, efficiency maximization has proven to be a challenging goal. In particular, the social welfare cannot be approximated by a better factor then the number of players. Therefore, the literature has mainly resorted to Pareto-efficiency as a way to achieve efficiency in such settings. While successful in some important scenarios, in many settings it is known that either exactly one incentive-compatible auction that always outputs a Pareto-efficient solution, or that no truthful mechanism can always guarantee a Pareto-efficient outcome. Traditionally, impossibility results can be avoided by considering approximations. However, Pareto-efficiency is a binary property (is either satisfied or not), which does not allow for approximations. In this paper we propose a new notion of efficiency, called \emph{liquid welfare}. This is the maximum amount of revenue an omniscient seller would be able to extract from a certain instance. We explain the intuition behind this objective function and show that it can be 2-approximated by two different auctions. Moreover, we show that no truthful algorithm can guarantee an approximation factor better than 4/3 with respect to the liquid welfare, and provide a truthful auction that attains this bound in a special case. Importantly, the liquid welfare benchmark also overcomes impossibilities for some settings. While it is impossible to design Pareto-efficient auctions for multi-unit auctions where players have decreasing marginal values, we give a deterministic $O(\log n)$-approximation for the liquid welfare in this setting

Effects of a rationing rule on the ausubel auction: a genetic algorithm implementation

The increasing use of auctions as a selling mechanism has led to a growing interest in the subject. Thus both auction theory and experimental examinations of these theories are being developed. A recent method used for carrying out examinations on auctions has been the design of computational simulations. The aim of this article is to develop a genetic algorithm to find automatically a bidder optimal strategy while the other players are always bidding sincerely. To this end a specific dynamic multiunit auction has been selected: the Ausubel auction, with private values, dropout information, and with several rationing rules implemented. The method provides the bidding strategy (defined as the action to be taken under different auction conditions) that maximizes the bidder's payoff. The algorithm is tested under several experimental environments that differ in the elasticity of their demand curves, number of bidders and quantity of lots auctioned. The results suggest that the approach leads to strategies that outperform sincere bidding when rationing is needed.Publicad

Chain: A Dynamic Double Auction Framework for Matching Patient Agents

In this paper we present and evaluate a general framework for the design of truthful auctions for matching agents in a dynamic, two-sided market. A single commodity, such as a resource or a task, is bought and sold by multiple buyers and sellers that arrive and depart over time. Our algorithm, Chain, provides the first framework that allows a truthful dynamic double auction (DA) to be constructed from a truthful, single-period (i.e. static) double-auction rule. The pricing and matching method of the Chain construction is unique amongst dynamic-auction rules that adopt the same building block. We examine experimentally the allocative efficiency of Chain when instantiated on various single-period rules, including the canonical McAfee double-auction rule. For a baseline we also consider non-truthful double auctions populated with zero-intelligence plus"-style learning agents. Chain-based auctions perform well in comparison with other schemes, especially as arrival intensity falls and agent valuations become more volatile