Fair Payments for Efficient Allocations in Public Sector Combinatorial Auctions

Motivated by the increasing use of auctions by government agencies, we consider the problem of fairly pricing public goods in a combinatorial auction. A well-known problem with the incentive-compatible Vickrey-Clarke-Groves (VCG) auction mechanism is that the resulting prices may not be in the core. Loosely speaking, this means the payments of the winners could be so low, that there are losing bidders who would have been willing to pay more than the payments of the winning bidders. Clearly, this ``unfair\u27\u27 outcome is unacceptable for a public-sector auction. Proxy-based combinatorial auctions, in which each bidder submits several package bids to a proxy, result in efficient outcomes and bidder-Pareto-optimal core-payments by winners, thus offering a viable practical alternative to address this problem. This paper confronts two critical issues facing the proxy-auction. First, motivated to minimize a bidder\u27s ability to benefit through strategic manipulation (through collusive agreement or unilateral action), we demonstrate the strength of a mechanism that minimizes total payments among all possible proxy auction outcomes, narrowing the previously broad solution concept. Secondly, we address the computational difficulties of achieving these outcomes with a constraint-generation approach, promising to broaden the range of applications for which the proxy-auction achieves a comfortably rapid solution

Allocation in Practice

How do we allocate scarcere sources? How do we fairly allocate costs? These are two pressing challenges facing society today. I discuss two recent projects at NICTA concerning resource and cost allocation. In the first, we have been working with FoodBank Local, a social startup working in collaboration with food bank charities around the world to optimise the logistics of collecting and distributing donated food. Before we can distribute this food, we must decide how to allocate it to different charities and food kitchens. This gives rise to a fair division problem with several new dimensions, rarely considered in the literature. In the second, we have been looking at cost allocation within the distribution network of a large multinational company. This also has several new dimensions rarely considered in the literature.Comment: To appear in Proc. of 37th edition of the German Conference on Artificial Intelligence (KI 2014), Springer LNC

Designing Coalition-Proof Reverse Auctions over Continuous Goods

This paper investigates reverse auctions that involve continuous values of different types of goods, general nonconvex constraints, and second stage costs. We seek to design the payment rules and conditions under which coalitions of participants cannot influence the auction outcome in order to obtain higher collective utility. Under the incentive-compatible Vickrey-Clarke-Groves mechanism, we show that coalition-proof outcomes are achieved if the submitted bids are convex and the constraint sets are of a polymatroid-type. These conditions, however, do not capture the complexity of the general class of reverse auctions under consideration. By relaxing the property of incentive-compatibility, we investigate further payment rules that are coalition-proof without any extra conditions on the submitted bids and the constraint sets. Since calculating the payments directly for these mechanisms is computationally difficult for auctions involving many participants, we present two computationally efficient methods. Our results are verified with several case studies based on electricity market data

Efficient and Equitable Airport Slot Allocation

This paper studies slot allocation at congested airports in Europe. First, I discuss the inefficiencies of the current regulation, introduced as part of the liberalisation process of the air transport market. Then, I consider three marked based methods which are suitable to achieve a more efficient allocation of slots to airlines: congestion pricing, auctions and secondary trading. These methods are examined in terms of their ability to improve efficiency and in terms of their implications on the distribution of slots’ scarcity rents. Special attention is drawn to complementarities between slots. Finally, I propose to auction slots periodically, allowing secondary trading well before the first auction takes place. By selling slots before the first auction incumbents can be partially compensated for the subsequent withdrawal of their slots.

Combinatorial auctions in practice

We survey the uses of combinatorial auctions that have been deployed in practice, giving emphasis to their key representational and economic aspects. In addition, we discuss behavioral economics considerations on both the bidder and auctioneer sides of the market, and the interrelated topics of simplicity and trust, highlighting key opportunities for future work