23,138 research outputs found
Simple, optimal and efficient auctions
Proceedings of the 7th International Workshop, WINE 2011, Singapore, December 11-14, 2011.We study the extent to which simple auctions can simultaneously achieve good revenue and efficiency guarantees in single-item settings. Motivated by the optimality of the second price auction with monopoly reserves when the bidders’ values are drawn i.i.d. from regular distributions [12], and its approximate optimality when they are drawn from independent regular distributions [11], we focus our attention to the second price auction with general (not necessarily monopoly) reserve prices, arguably one of the simplest and most intuitive auction formats. As our main result, we show that for a carefully chosen set of reserve prices this auction guarantees at least 20% of both the optimal welfare and the optimal revenue, when the bidders’ values are distributed according to independent, not necessarily identical, regular distributions. We also prove a similar guarantee, when the values are drawn i.i.d. from a—possibly irregular—distribution.National Science Foundation (U.S.) (award CCF-0953960)National Science Foundation (U.S.) (CCF-1101491
Auctioning incentive contracts; application to welfare-to-work programs
This paper applies the theory of auctioning incentive contracts to welfare-to-work programs. In several countries, the government procures welfare-to-work projects to employment service providers. In doing so, the government trades off adverse selection (the winning provider is not the most efficient one) and moral hazard (the winning provider shirks in his effort to reintegrate unemployed people). We compare three simple auctions with the socially optimal mechanism and show that two of these auctions approximate the optimal mechanism if the number of providers is large. Using simulations, we observe that competition between three bidders is already sufficient for the outcome of these auctions to reach 95% of the optimal level of social welfare.
Procurement When Price and Quality Matter
A buyer seeks to procure a good characterized by its price and its quality from suppliers who have private information about their cost structure (fixed cost + marginal cost of providing quality). We solve for the optimal buying procedure, i.e. the procedure that maximizes the buyer’s expected utility. We then use the optimal procedure as a theoretical and numerical benchmark to study practical and simple buying procedures such as scoring auctions and negotiation. Specifically, we derive the restrictions that these simpler procedures place on allocations
and compare them with the optimal allocations to generate insights about the properties of these simpler procedures and identify environments where they are likely to do well. We also use the optimal procedure benchmark to compare the performance of these procedures numerically. We find that scoring auctions are able to extract a good proportion of the surplus from being a
strategic buyer, that is, the difference between the expected revenue from the optimal mechanism and the efficient auction. Sequential procedures (to which many negotiation processes belong) do less well, and, in fact, often do worse than simply holding an efficient auction. In
each case, we identify the underlying reason for these results
Recommended from our members
Auctions with Limited Commitment
We study auction design in the standard symmetric independent private values environment, where the seller lacks the commitment power to withhold an unsold object off the market. The seller has a single object and can conduct an infinite sequence of standard auctions with reserve prices to maximize her expected profit. In each period, the seller can commit to a reserve price for the current period but cannot commit to future reserve prices. We analyze the problem with limited commitment through an auxiliary mechanism design problem with full commitment, in which an additional constraint reflects the sequential rationality of the seller. We characterize the maximal profit achievable in any perfect Bayesian equilibrium in the limit as the period length vanishes. The static full commitment profit is not achievable but the seller can always guarantee the profit of an efficient auction. If the number of buyers exceeds a cutoff which is small for many distributions, the efficient auction is optimal. Otherwise, the efficient auction is not optimal, and we give conditions under which the optimal solution consists of an initial auction with a non-trivial reserve price followed by a continuously decreasing price path. The solution is described by a simple ordinary differential equation. Our analysis combines insights from bargaining, auctions, and mechanism design
Auctions with Severely Bounded Communication
We study auctions with severe bounds on the communication allowed: each
bidder may only transmit t bits of information to the auctioneer. We consider
both welfare- and profit-maximizing auctions under this communication
restriction. For both measures, we determine the optimal auction and show that
the loss incurred relative to unconstrained auctions is mild. We prove
non-surprising properties of these kinds of auctions, e.g., that in optimal
mechanisms bidders simply report the interval in which their valuation lies in,
as well as some surprising properties, e.g., that asymmetric auctions are
better than symmetric ones and that multi-round auctions reduce the
communication complexity only by a linear factor
Approximately Optimal Mechanism Design: Motivation, Examples, and Lessons Learned
Optimal mechanism design enjoys a beautiful and well-developed theory, and
also a number of killer applications. Rules of thumb produced by the field
influence everything from how governments sell wireless spectrum licenses to
how the major search engines auction off online advertising. There are,
however, some basic problems for which the traditional optimal mechanism design
approach is ill-suited --- either because it makes overly strong assumptions,
or because it advocates overly complex designs. The thesis of this paper is
that approximately optimal mechanisms allow us to reason about fundamental
questions that seem out of reach of the traditional theory.
This survey has three main parts. The first part describes the approximately
optimal mechanism design paradigm --- how it works, and what we aim to learn by
applying it. The second and third parts of the survey cover two case studies,
where we instantiate the general design paradigm to investigate two basic
questions. In the first example, we consider revenue maximization in a
single-item auction with heterogeneous bidders. Our goal is to understand if
complexity --- in the sense of detailed distributional knowledge --- is an
essential feature of good auctions for this problem, or alternatively if there
are simpler auctions that are near-optimal. The second example considers
welfare maximization with multiple items. Our goal here is similar in spirit:
when is complexity --- in the form of high-dimensional bid spaces --- an
essential feature of every auction that guarantees reasonable welfare? Are
there interesting cases where low-dimensional bid spaces suffice?Comment: Based on a talk given by the author at the 15th ACM Conference on
Economics and Computation (EC), June 201
Truthful approximation mechanisms for restricted combinatorial auctions
When attempting to design a truthful mechanism for a computationally hard problem such as combinatorial auctions, one is faced with the problem that most efficiently computable heuristics can not be embedded in any truthful mechanism (e.g. VCG-like payment rules will not ensure truthfulness).
We develop a set of techniques that allow constructing efficiently computable truthful mechanisms for combinatorial auctions in the special case where each bidder desires a specific known subset of items and only the valuation is unknown by the mechanism (the single parameter case). For this case we extend the work of Lehmann, O'Callaghan, and Shoham, who presented greedy heuristics. We show how to use If-Then-Else constructs, perform a partial search, and use the LP relaxation. We apply these techniques for several canonical types of combinatorial auctions, obtaining truthful mechanisms with provable approximation ratios
On the Efficiency of the Walrasian Mechanism
Central results in economics guarantee the existence of efficient equilibria
for various classes of markets. An underlying assumption in early work is that
agents are price-takers, i.e., agents honestly report their true demand in
response to prices. A line of research in economics, initiated by Hurwicz
(1972), is devoted to understanding how such markets perform when agents are
strategic about their demands. This is captured by the \emph{Walrasian
Mechanism} that proceeds by collecting reported demands, finding clearing
prices in the \emph{reported} market via an ascending price t\^{a}tonnement
procedure, and returns the resulting allocation. Similar mechanisms are used,
for example, in the daily opening of the New York Stock Exchange and the call
market for copper and gold in London.
In practice, it is commonly observed that agents in such markets reduce their
demand leading to behaviors resembling bargaining and to inefficient outcomes.
We ask how inefficient the equilibria can be. Our main result is that the
welfare of every pure Nash equilibrium of the Walrasian mechanism is at least
one quarter of the optimal welfare, when players have gross substitute
valuations and do not overbid. Previous analysis of the Walrasian mechanism
have resorted to large market assumptions to show convergence to efficiency in
the limit. Our result shows that approximate efficiency is guaranteed
regardless of the size of the market
- …