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152
Beyond VCG: Frugality of truthful mechanisms
 In Proceedings of the 46th Annual IEEE Symposium on Foundations of Computer Science
, 2005
"... We study truthful mechanisms for auctions in which the auctioneer is trying to hire a team of agents to perform a complex task, and paying them for their work. As common in the field of mechanism design, we assume that the agents are selfish and will act in such a way as to maximize their profit, wh ..."
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Cited by 47 (3 self)
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We study truthful mechanisms for auctions in which the auctioneer is trying to hire a team of agents to perform a complex task, and paying them for their work. As common in the field of mechanism design, we assume that the agents are selfish and will act in such a way as to maximize their profit, which in particular may include misrepresenting their true incurred cost. Our first contribution is a new and natural definition of the frugality ratio of a mechanism, measuring the amount by which a mechanism “overpays”, and extending previous definitions to all monopolyfree set systems. After reexamining several known results in light of this new definition, we proceed to study in detail shortest path auctions and “routofk sets ” auctions. We show that when individual set systems (e.g., graphs) are considered instead of worst cases over all instances, these problems exhibit a rich structure, and the performance of mechanisms may be vastly different. In particular, we show that the wellknown VCG mechanism may be far from optimal in these settings, and we propose and analyze a mechanism that is always within a constant factor of optimal. 1
Algorithms for selfish agents: Mechanism design for distributed computation
 In Proceedings of the 16th Annual Symposium on Theoretical Aspects of Computer Science
, 1999
"... Abstract This paper considers algorithmic problems in a distributed setting where the participants cannot be assumed to follow the algorithm but rather their own selfinterest. Such scenarios arise, in particular, when computers or users aim to cooperate or trade over the Internet. As such participa ..."
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Cited by 35 (1 self)
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Abstract This paper considers algorithmic problems in a distributed setting where the participants cannot be assumed to follow the algorithm but rather their own selfinterest. Such scenarios arise, in particular, when computers or users aim to cooperate or trade over the Internet. As such participants, termed agents, are capable of manipulating the algorithm, the algorithm designer should ensure in advance that the agents ' interests are best served by behaving correctly. This exposition presents a model to formally study such algorithms. This model, based on the field of mechanism design, is taken from the author's joint work with Amir Ronen, and is similar to approaches taken in the distributed AI community in recent years. Using this model, we demonstrate how some of the techniques of mechanism design can be applied towards distributed computation problems. We then exhibit some issues that arise in distributed computation which require going beyond the existing theory of mechanism design. 1 Introduction A large part of research in computer science is concerned with protocols and algorithms for interconnected collections of computers. The designer of such an algorithm or protocol always makes an implicit assumption that the participating computers will act as instructed except, perhaps, for the faulty or malicious ones.
Truthful and Competitive Double Auctions
, 2002
"... In this paper we consider the problem of designing a mechanism for double auctions where bidders each bid to buy or sell one unit of a single commodity. We assume that each bidder's utility value for the item is private to them and we focus on truthful mechanisms, ones were the bidders' optimal stra ..."
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Cited by 23 (8 self)
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In this paper we consider the problem of designing a mechanism for double auctions where bidders each bid to buy or sell one unit of a single commodity. We assume that each bidder's utility value for the item is private to them and we focus on truthful mechanisms, ones were the bidders' optimal strategy is to bid their true utility. The profit of the auctioneer is the difference between the total payments from buyers and total to the sellers. We aim to maximize this profit. We extend the competitive analysis framework of basic auctions [9] and give an upper bound on the profit of any truthful double auction. We then reduce the competitive double auction problem to basic auctions by showing that any competitive basic auction can be converted into a competitive double auction with a competitive ratio of twice that of the basic auction.
Vickrey Pricing in Network Routing: Fast Payment Computation
 In Proc. of the 42nd IEEE Symposium on Foundations of Computer Science
, 2001
"... Eliciting truthful responses from selfinterested agents is an important problem in game theory and microeconomics, and it is studied under mechanism design or implementation theory. Truthful mechanisms have received considerable interest within computer science recently for designing protocols f ..."
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Cited by 23 (0 self)
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Eliciting truthful responses from selfinterested agents is an important problem in game theory and microeconomics, and it is studied under mechanism design or implementation theory. Truthful mechanisms have received considerable interest within computer science recently for designing protocols for Internetbased applications, which typically involve cooperation of multiple selfinterested agents. A cornerstone of the mechanism design field is the Vickrey mechanism, or more generally the class of VickreyClarkeGroves mechanisms. These mechanisms are known to be incentivecompatible, meaning that rational agents maximize their utility by truthfully revealing their preferences. In the VickreyClarkeGroves (VCG) mechanism, each agent receives a "payment" for his participation, and this payment is proportional to the added "value" he brings to the system. Implementing the VCG mechanism often requires solving a (nontrivial) optimization problem n + 1 times, once with all agents, and once corresponding to each agent's deletion to determine his incremental value. An important algorithmic challenge is to reduce this computational overhead.
Competitiveness via Consensus
, 2002
"... We introduce Consensus Revenue Estimate (CORE) auctions. This is a class of competitive auctions that is interesting for several reasons. One auction from this class achieves a better competitive ratio than any previously known auction. Another one uses only two random bits, whereas the previously k ..."
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Cited by 21 (7 self)
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We introduce Consensus Revenue Estimate (CORE) auctions. This is a class of competitive auctions that is interesting for several reasons. One auction from this class achieves a better competitive ratio than any previously known auction. Another one uses only two random bits, whereas the previously known competitive auctions on n bidders use n random bits. A parameterized CORE auction performs better than the previous auctions in the context of massmarket goods, such as digital goods. The improved performance is due to the consensus estimate technique that allows more information to be extracted from the input. This technique is very natural and may be useful in other contexts.
Bidding to the top: VCG and equilibria of positionbased auctions
 In Proc. Workshop on Approximation and Online Algorithms (WAOA
, 2006
"... Many popular search engines run an auction to determine the placement of advertisements next to search results. Current auctions at Google and Yahoo! let advertisers specify a single amount as their bid in the auction. This bid is interpreted as the maximum amount the advertiser is willing to pay pe ..."
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Cited by 21 (4 self)
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Many popular search engines run an auction to determine the placement of advertisements next to search results. Current auctions at Google and Yahoo! let advertisers specify a single amount as their bid in the auction. This bid is interpreted as the maximum amount the advertiser is willing to pay per click on its ad. When search queries arrive, the bids are used to rank the ads linearly on the search result page. The advertisers pay for each user who clicks on their ad, and the amount charged depends on the bids of all the advertisers participating in the auction. In order to be effective, advertisers seek to be as high on the list as their budget permits, subject to the market. We study the problem of ranking ads and associated pricing mechanisms when the advertisers not only specify a bid, but additionally express their preference for positions in the list of ads. In particular, we study prefix position auctions where advertiser i can specify that she is interested only in the top κi positions. We present a simple allocation and pricing mechanism that generalizes the desirable properties of current auctions that do not have position constraints. In addition, we show that our auction has an envyfree [4] or symmetric [8] Nash equilibrium with the same outcome in allocation and pricing as the wellknown truthful VickreyClarkeGroves (VCG) auction. Furthermore, we show that this equilibrium is the best such equilibrium for the advertisers in terms of the profit made by each advertiser. We also discuss other positionbased auctions. 1
Semiparametric Estimation of a Simultaneous Game with Incomplete Information
 Journal of Econometrics
, 2010
"... We analyze a 2 × 2 simultaneous game. We start by showing that a likelihood function defined over the set of four observable outcomes and all possible variations of the game exists only if players have incomplete information. We assume a general incomplete information structure, where players ’ beli ..."
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Cited by 21 (3 self)
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We analyze a 2 × 2 simultaneous game. We start by showing that a likelihood function defined over the set of four observable outcomes and all possible variations of the game exists only if players have incomplete information. We assume a general incomplete information structure, where players ’ beliefs are conditioned on a vector of signals Z observable by the researcher but whose exact distribution is known only to the players. The resulting BayesianNash equilibrium (BNE) is characterized as a vector of conditional moment restrictions. We show how to exploit the information contained in these equilibrium conditions efficiently. The proposal takes the form of a twostep estimator. The first step estimates the unknown equilibrium beliefs using semiparametric restrictions analog to the population BNE conditions. The second step maximizes a trimmed loglikelihood function using the estimates from the first step as plugins for the unknown equilibrium beliefs. The trimming set is an interior subset of the support of Z where the BNE conditions have a unique solution. The resulting estimator of the vector of structural parameters ‘θ ’ is √ N−consistent and exploits all information in the model efficiently. We allow Z to
Limitations of VCGbased mechanisms
 In Proceedings of the 39th annual ACM symposium on Theory of computing
, 2007
"... We consider computationallyefficient incentivecompatible mechanisms that use the VCG payment scheme, and study how well they can approximate the social welfare in auction settings. We present a novel technique for setting lower bounds on the approximation ratio of this type of mechanisms. Specific ..."
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Cited by 18 (2 self)
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We consider computationallyefficient incentivecompatible mechanisms that use the VCG payment scheme, and study how well they can approximate the social welfare in auction settings. We present a novel technique for setting lower bounds on the approximation ratio of this type of mechanisms. Specifically, for combinatorial auctions among submodular (and thus also subadditive) bidders we prove an Ω(m 1 6) lower bound, which is close to the known upper bound of O(m 1 2), and qualitatively higher than the constant factor approximation possible from a purely computational point of view.
On the expected payment of mechanisms for task allocation
 In PODC
, 2004
"... We study a generic task allocation problem called shortest paths: Let G be a directed graph in which the edges are owned by self interested agents. Each edge has an associated cost that is privately known to its owner. Let s and t be two distinguished nodes in G. Given a distribution on the edge cos ..."
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Cited by 18 (1 self)
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We study a generic task allocation problem called shortest paths: Let G be a directed graph in which the edges are owned by self interested agents. Each edge has an associated cost that is privately known to its owner. Let s and t be two distinguished nodes in G. Given a distribution on the edge costs, the goal is to design a mechanism (protocol) which acquires a cheap st path. We first prove that the class of generalized VCG mechanisms has certain monotonicity properties. We exploit this observation to obtain, under an independence assumption, expected payments which are significantly better than the worst case bounds of [4, 7]. We then investigate whether these payments can be improved when there is a competition among paths. Surprisingly, we give evidence to the fact that typically such competition hardly helps incentive compatible mechanisms. In particular, we show this for the celebrated VCG mechanism. We then construct a novel general protocol combining the advantages of incentive compatible and nonincentive compatible mechanisms. Under reasonable assumptions on the agents we show that the overpayment of our mechanism is very small. Finally, we demonstrate that many task allocation problems can be reduced to shortest paths. 1