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188
Algorithmic mechanism design
 Games and Economic Behavior
, 1999
"... We consider algorithmic problems in a distributed setting where the participants cannot be assumed to follow the algorithm but rather their own selfinterest. As such participants, termed agents, are capable of manipulating the algorithm, the algorithm designer should ensure in advance that the agen ..."
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Cited by 556 (17 self)
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We consider algorithmic problems in a distributed setting where the participants cannot be assumed to follow the algorithm but rather their own selfinterest. 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. Following notions from the field of mechanism design, we suggest a framework for studying such algorithms. Our main technical contribution concerns the study of a representative task scheduling problem for which the standard mechanism design tools do not suffice. Journal of Economic Literature
Truthful Mechanisms for OneParameter Agents
"... In this paper, we show how to design truthful (dominant strategy) mechanisms for several combinatorial problems where each agent’s secret data is naturally expressed by a single positive real number. The goal of the mechanisms we consider is to allocate loads placed on the agents, and an agent’s sec ..."
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Cited by 185 (4 self)
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In this paper, we show how to design truthful (dominant strategy) mechanisms for several combinatorial problems where each agent’s secret data is naturally expressed by a single positive real number. The goal of the mechanisms we consider is to allocate loads placed on the agents, and an agent’s secret data is the cost she incurs per unit load. We give an exact characterization for the algorithms that can be used to design truthful mechanisms for such load balancing problems using appropriate side payments. We use our characterization to design polynomial time truthful mechanisms for several problems in combinatorial optimization to which the celebrated VCG mechanism does not apply. For scheduling related parallel machines (QjjCmax), we give a 3approximation mechanism based on randomized rounding of the optimal fractional solution. This problem is NPcomplete, and the standard approximation algorithms (greedy loadbalancing or the PTAS) cannot be used in truthful mechanisms. We show our mechanism to be frugal, in that the total payment needed is only a logarithmic factor more than the actual costs incurred by the machines, unless one machine dominates the total processing power. We also give truthful mechanisms for maximum flow, Qjj P Cj (scheduling related machines to minimize the sum of completion times), optimizing an affine function over a fixed set, and special cases of uncapacitated facility location. In addition, for Qjj P wjCj (minimizing the weighted sum of completion times), we prove a lower bound of 2 p 3 for the best approximation ratio achievable by a truthful mechanism.
Computationally feasible VCG mechanisms
 In Proceedings of the Second ACM Conference on Electronic Commerce (EC’00
, 2000
"... A major achievement of mechanism design theory is a general method for the construction of truthful mechanisms called VCG. When applying this method to complex problems such as combinatorial auctions, a difficulty arises: VCG mechanisms are required to compute optimal outcomes and are therefore comp ..."
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Cited by 185 (5 self)
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A major achievement of mechanism design theory is a general method for the construction of truthful mechanisms called VCG. When applying this method to complex problems such as combinatorial auctions, a difficulty arises: VCG mechanisms are required to compute optimal outcomes and are therefore computationally infeasible. However, if the optimal outcome is replaced by the results of a suboptimal algorithm, the resulting mechanism (termed VCGbased) is no longer necessarily truthful. The first part of this paper studies this phenomenon in depth and shows that it is near universal. Specifically, we prove that essentially all reasonable approximations or heuristics for combinatorial auctions as well as a wide class of cost minimization problems yield nontruthful VCGbased mechanisms. We generalize these results for affine maximizers. The second part of this paper proposes a general method for circumventing the above problem. We introduce a modification of VCGbased mechanisms in which the agents are given a chance to improve the output of the underlying algorithm. When the agents behave truthfully, the welfare obtained by the mechanism is at least as good as the one obtained by the algorithm’s output. We provide a strong rationale for truthtelling behavior. Our method satisfies individual rationality as well.
Incentive compatible multi unit combinatorial auctions
 In TARK 03
, 2003
"... This paper deals with multiunit combinatorial auctions where there are n types of goods for sale, and for each good there is some fixed number of units. We focus on the case where each bidder desires a relatively small number of units of each good. In particular, this includes the case where each g ..."
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Cited by 90 (10 self)
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This paper deals with multiunit combinatorial auctions where there are n types of goods for sale, and for each good there is some fixed number of units. We focus on the case where each bidder desires a relatively small number of units of each good. In particular, this includes the case where each good has exactly k units, and each bidder desires no more than a single unit of each good. We provide incentive compatible mechanisms for combinatorial auctions for the general case where bidders are not limited to single minded valuations. The mechanisms we give have approximation ratios close to the best possible for both online and offline scenarios. This is the first result where nonVCG mechanisms are derived for nonsingle minded bidders for a natural model of combinatorial auctions.
An analysis of alternative slot auction designs for sponsored search
 In Proceedings of the 7th ACM conference on Electronic commerce
, 2006
"... Billions of dollars are spent each year on sponsored search, a form of advertising where merchants pay for placement alongside web search results. Slots for ad listings are allocated via an auctionstyle mechanism where the higher a merchant bids, the more likely his ad is to appear above other ads ..."
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Cited by 71 (6 self)
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Billions of dollars are spent each year on sponsored search, a form of advertising where merchants pay for placement alongside web search results. Slots for ad listings are allocated via an auctionstyle mechanism where the higher a merchant bids, the more likely his ad is to appear above other ads on the page. In this paper we analyze the incentive, efficiency, and revenue properties of two slot auction designs: “rank by bid ” (RBB) and “rank by revenue” (RBR), which correspond to stylized versions of the mechanisms currently used by Yahoo! and Google, respectively. We also consider first and secondprice payment rules together with each of these allocation rules, as both have been used historically. We consider both the “shortrun ” incomplete information setting and the “longrun ” complete information setting. With incomplete information, neither RBB nor RBR are truthful with either first or second pricing. We find that the informational requirements of RBB are much weaker than those of RBR, but that RBR is efficient whereas RBB is not. We also show that no revenue ranking of RBB and RBR is possible given an arbitrary distribution over bidder values and relevance. With complete information, we find that no equilibrium exists with first pricing using either RBB or RBR. We show that there typically exists a multitude of equilibria with second pricing, and we bound the divergence of (economic) value in such equilibria from the value obtained assuming all merchants bid truthfully.
The Market for Evaluations
, 1999
"... Recent developments in computer networks have driven the cost of distributing information virtually to zero, creating extraordinary opportunities for sharing product evaluations. We present pricing and subsidy mechanisms that operate through a computerized market and induce the efficient provision o ..."
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Cited by 56 (7 self)
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Recent developments in computer networks have driven the cost of distributing information virtually to zero, creating extraordinary opportunities for sharing product evaluations. We present pricing and subsidy mechanisms that operate through a computerized market and induce the efficient provision of evaluations. The mechanisms overcome three major challenges: first, evaluations, which are public goods, are likely to be underprovided; second, an inefficient ordering of evaluators may arise; third, the optimal quantity of evaluations depends on what is learned from the initial evaluations. Keywords: evaluations, information sharing, product quality, computer network, market (JEL D70, D83, H41, L15) 2 Subjective evaluations by others are a valuable tool for consumers who are choosing which products to buy or how to spend their time. For example, we read magazines devoted to product evaluation before purchasing cars and appliances. We ask our friends and read reviews by professional cr...
Worstcase optimal redistribution of VCG payments
 In Proceedings of the ACM Conference on Electronic Commerce (EC
, 2007
"... For allocation problems with one or more items, the wellknown VickreyClarkeGroves (VCG) mechanism is efficient, strategyproof, individually rational, and does not incur a deficit. However, the VCG mechanism is not (strongly) budget balanced: generally, the agents ’ payments will sum to more than ..."
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Cited by 46 (15 self)
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For allocation problems with one or more items, the wellknown VickreyClarkeGroves (VCG) mechanism is efficient, strategyproof, individually rational, and does not incur a deficit. However, the VCG mechanism is not (strongly) budget balanced: generally, the agents ’ payments will sum to more than 0. If there is an auctioneer who is selling the items, this may be desirable, because the surplus payment corresponds to revenue for the auctioneer. However, if the items do not have an owner and the agents are merely interested in allocating the items efficiently among themselves, any surplus payment is undesirable, because it will have to flow out of the system of agents. In 2006, Cavallo [3] proposed a mechanism that redistributes some of the VCG payment back to the agents, while maintaining efficiency, strategyproofness, individual rationality, and the