Automated Mechanism Design for Classification with Partial Verification

We study the problem of automated mechanism design with partial verification, where each type can (mis)report only a restricted set of types (rather than any other type), induced by the principal's limited verification power. We prove hardness results when the revelation principle does not necessarily hold, as well as when types have even minimally different preferences. In light of these hardness results, we focus on truthful mechanisms in the setting where all types share the same preference over outcomes, which is motivated by applications in, e.g., strategic classification. We present a number of algorithmic and structural results, including an efficient algorithm for finding optimal deterministic truthful mechanisms, which also implies a faster algorithm for finding optimal randomized truthful mechanisms via a characterization based on convexity. We then consider a more general setting, where the principal's cost is a function of the combination of outcomes assigned to each type. In particular, we focus on the case where the cost function is submodular, and give generalizations of essentially all our results in the classical setting where the cost function is additive. Our results provide a relatively complete picture for automated mechanism design with partial verification.Comment: AAAI'2

Mediation in Situations of Conflict and Limited Commitment

We study the reasons and conditions under which mediation is beneficial when a principal needs information from an agent to implement an action. Assuming a strong form of limited commitment, the principal may employ a mediator who gathers information and makes non-binding proposals. We show that a partial rev-elation of information is more effective through a mediator than through the agent himself. This implies that mediation is strictly helpful if and only if the likelihood of a conflict of interest is positive but not too high. The value of mediation depends non-monotonically on the degree of conflict. Our insights extend to general models of contracting with imperfect commitment

College admissions and the role of information : an experimental study

We analyze two well-known matching mechanisms—the Gale-Shapley, and the Top Trading Cycles (TTC) mechanisms—in the experimental lab in three different informational settings, and study the role of information in individual decision making. Our results suggest that—in line with the theory—in the college admissions model the Gale-Shapley mechanism outperforms the TTC mechanisms in terms of efficiency and stability, and it is as successful as the TTC mechanism regarding the proportion of truthful preference revelation. In addition, we find that information has an important effect on truthful behavior and stability. Nevertheless, regarding efficiency, the Gale-Shapley mechanism is less sensitive to the amount of information participants hold

Transferable Control

In this paper, we introduce the notion of transferable control, defined as a situation where one party (the principal, say) can transfer control to another party (the agent) but cannot commit herself to do so. One theoretical foundation for this notion builds on the distinction between formal and real authority introduced by Aghion and Tirole, in which the actual exercise of authority may require noncontractible information, absent which formal control rights are vacuous. We use this notion to study the extent to which control transfers may allow an agent to reveal information regarding his ability or willingness to cooperate with the principal in the future. We show that the distinction between contractible and transferable control can drastically influence how learning takes place: with contractible control, information about the agent can often be acquired through revelation mechanisms that involve communication and message-contingent control allocations; in contrast, when control is transferable but not contractible, it can be optimal to transfer control unconditionally and learn instead from the way in which the agent exercises control

Optimal Information Revelation by Informed Investors

This paper studies the structure of optimal finance contracts in an agency model of outside finance, when investors possess private information. We show that, depending on the intensity of the entrepreneur’s moral hazard problem, optimal contracts induce full, partial, or no revelation of the investor’s private information. A partial or nonrevelation of information is optimal, when it mitigates an undersupply of effort by the entrepreneur due to moral hazard

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 $\log \log$ 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

Mediation in Situations of Conflict

We study the effectiveness of mediators in situations of conflict. In a game of cheap talk a principal may employ a mediator whose task is to gather information and make non--binding proposals. We show that mediators facilitate information transmission and are helpful if and only if the likelihood of a conflict of interest is strictly positive but not too high. Mediation increases the amount of information that can be induced in equilibrium and is helpful when full information revelation is not feasible. The insights of this paper extend to general models of mechanism design with imperfect commitment of the contract designer.