Envy Freedom and Prior-free Mechanism Design

We consider the provision of an abstract service to single-dimensional agents. Our model includes position auctions, single-minded combinatorial auctions, and constrained matching markets. When the agents' values are drawn from a distribution, the Bayesian optimal mechanism is given by Myerson (1981) as a virtual-surplus optimizer. We develop a framework for prior-free mechanism design and analysis. A good mechanism in our framework approximates the optimal mechanism for the distribution if there is a distribution; moreover, when there is no distribution this mechanism still performs well. We define and characterize optimal envy-free outcomes in symmetric single-dimensional environments. Our characterization mirrors Myerson's theory. Furthermore, unlike in mechanism design where there is no point-wise optimal mechanism, there is always a point-wise optimal envy-free outcome. Envy-free outcomes and incentive-compatible mechanisms are similar in structure and performance. We therefore use the optimal envy-free revenue as a benchmark for measuring the performance of a prior-free mechanism. A good mechanism is one that approximates the envy free benchmark on any profile of agent values. We show that good mechanisms exist, and in particular, a natural generalization of the random sampling auction of Goldberg et al. (2001) is a constant approximation

Core-competitive Auctions

One of the major drawbacks of the celebrated VCG auction is its low (or zero) revenue even when the agents have high value for the goods and a {\em competitive} outcome could have generated a significant revenue. A competitive outcome is one for which it is impossible for the seller and a subset of buyers to `block' the auction by defecting and negotiating an outcome with higher payoffs for themselves. This corresponds to the well-known concept of {\em core} in cooperative game theory. In particular, VCG revenue is known to be not competitive when the goods being sold have complementarities. A bottleneck here is an impossibility result showing that there is no auction that simultaneously achieves competitive prices (a core outcome) and incentive-compatibility. In this paper we try to overcome the above impossibility result by asking the following natural question: is it possible to design an incentive-compatible auction whose revenue is comparable (even if less) to a competitive outcome? Towards this, we define a notion of {\em core-competitive} auctions. We say that an incentive-compatible auction is $\alpha$-core-competitive if its revenue is at least $1/\alpha$ fraction of the minimum revenue of a core-outcome. We study the Text-and-Image setting. In this setting, there is an ad slot which can be filled with either a single image ad or $k$ text ads. We design an $O(\ln \ln k)$ core-competitive randomized auction and an $O(\sqrt{\ln(k)})$ competitive deterministic auction for the Text-and-Image setting. We also show that both factors are tight

The Paradoxical Effects of Blockchain Technology on Social Networking Practices

Blockchain technology is a promising, yet not well understood, enabler of large-scale societal and economic change. For instance, blockchain makes it possible for users to securely and profitably share content on social media platforms. In this study, w

Optimal Competitive Auctions

We study the design of truthful auctions for selling identical items in unlimited supply (e.g., digital goods) to n unit demand buyers. This classic problem stands out from profit-maximizing auction design literature as it requires no probabilistic assumptions on buyers' valuations and employs the framework of competitive analysis. Our objective is to optimize the worst-case performance of an auction, measured by the ratio between a given benchmark and revenue generated by the auction. We establish a sufficient and necessary condition that characterizes competitive ratios for all monotone benchmarks. The characterization identifies the worst-case distribution of instances and reveals intrinsic relations between competitive ratios and benchmarks in the competitive analysis. With the characterization at hand, we show optimal competitive auctions for two natural benchmarks. The most well-studied benchmark $\mathcal{F}^{(2)}(\cdot)$ measures the envy-free optimal revenue where at least two buyers win. Goldberg et al. [13] showed a sequence of lower bounds on the competitive ratio for each number of buyers n. They conjectured that all these bounds are tight. We show that optimal competitive auctions match these bounds. Thus, we confirm the conjecture and settle a central open problem in the design of digital goods auctions. As one more application we examine another economically meaningful benchmark, which measures the optimal revenue across all limited-supply Vickrey auctions. We identify the optimal competitive ratios to be $(\frac{n}{n-1})^{n-1}-1$ for each number of buyers n, that is $e-1$ as $n$ approaches infinity

Prior-Independent Mechanisms for Scheduling

We study the makespan minimization problem with unrelated selfish machines under the assumption that job sizes are stochastic. We design simple truthful mechanisms that under various distributional assumptions provide constant and sublogarithmic approximations to expected makespan. Our mechanisms are prior-independent in that they do not rely on knowledge of the job size distributions. Prior-independent approximation mechanisms have been previously studied for the objective of revenue maximization [Dhangwatnotai, Roughgarden and Yan'10, Devanur, Hartline, Karlin and Nguyen'11, Roughgarden, Talgam-Cohen and Yan'12]. In contrast to our results, in prior-free settings no truthful anonymous deterministic mechanism for the makespan objective can provide a sublinear approximation [Ashlagi, Dobzinski and Lavi'09].Comment: This paper will appear in Proceedings of the ACM Symposium on Theory of Computing 2013 (STOC'13

Are Property Rights Relevant for Development Economics? On the Dangers of Western Constructivism.

Although the importance of property rights as the engine of growth remains beyond dispute, this article tries to show that the crucial issue is not so much the definition of the allegedly ‘optimal’ property right system, as the understanding of the ideological elements that justify property rights in the first place – entrepreneurship and self-responsibility. Unless one clearly perceives the nature of the ideological structure that legitimises the rules of the game in a given society, it is virtually impossible to understand why growth-conducive property-right systems fail to emerge and be accepted. Put differently, property rights are certainly necessary for growth. But they are no tools for policy-making. Getting them right – or transferring them from other contexts - is not enough, especially if their assignment and enforcement remains a top-down process, whereby local politicians or international technocrats suggest and enforce institutional arrangements experienced elsewhere.