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770
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 674 (21 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
Bidding and Allocation in Combinatorial Auctions
 In ACM Conference on Electronic Commerce
, 2000
"... When an auction of multiple items is performed, it is often desirable to allow bids on combinations of items, as opposed to only on single items. Such an auction is often called "combinatorial ", and the exponential number of possible combinations results in computational intractability ..."
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Cited by 277 (11 self)
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When an auction of multiple items is performed, it is often desirable to allow bids on combinations of items, as opposed to only on single items. Such an auction is often called "combinatorial ", and the exponential number of possible combinations results in computational intractability of many aspects regarding such an auction. This paper considers two of these aspects: the bidding language and the allocation algorithm. First we consider which kinds of bids on combinations are allowed and how, i.e. in what language, they are specified. The basic tradeoff is the expressibility of the language versus its simplicity. We consider and formalize several bidding languages and compare their strengths. We prove exponential separations between the expressive power of different languages, and show that one language, "ORbids with phantom items", can polynomially simulate the others. We then consider the problem of determining the best allocation  a problem known to be computationally intractable. We suggest an approach based on Linear Programming (LP) and motivate it. We prove that the LP approach finds an optimal allocation if and only if prices can be attached to single items in the auction. We pinpoint several classes of auctions where this is the case, and suggest greedy and branchandbound heuristics based on LP for other cases. 1
A BGPbased Mechanism for LowestCost Routing
, 2002
"... The routing of traffic between... this paper, we address the problem of interdomain routing from a mechanismdesign point of view. The application of mechanismdesign principles to the study of routing is the subject of earlier work by Nisan and Ronen [15] and Hershberger and Suri [11]. In this pape ..."
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Cited by 267 (17 self)
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The routing of traffic between... this paper, we address the problem of interdomain routing from a mechanismdesign point of view. The application of mechanismdesign principles to the study of routing is the subject of earlier work by Nisan and Ronen [15] and Hershberger and Suri [11]. In this paper, we formulate and solve a version of the routingmechanism design problem that is different from the previously studied version in three ways that make it more accurately reflective of realworld interdomain routing: (1) we treat the nodes as strategic agents, rather than the links; (2) our mechanism computes lowestcost routes for all sourcedestination pairs and payments for transit nodes on all of the routes (rather than computing routes and payments for only one sourcedestination pair at a time, as is done in [15,11]); (3) we show how to compute our mechanism with a distributed algorithm that is a straightforward extension to BGP and causes only modest increases in routingtable size and convergence time (in contrast with the centralized algorithms used in [15,11]). This approach of using an existing protocol as a substrate for distributed computation may prove useful in future development of Internet algorithms generally, not only for routing or pricing problems. Our design and analysis of a strategyproof, BGPbased routing mechanism provides a new, promising direction in distributed algorithmic mechanism design, which has heretofore been focused mainly on multicast cost sharing.
Privacy Preserving Auctions and Mechanism Design
, 1999
"... We suggest an architecture for executing protocols for auctions and, more generally, mechanism design. Our goal is to preserve the privacy of the inputs of the participants (so that no nonessential information about them is divulged, even a posteriori) while maintaining communication and computation ..."
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Cited by 250 (13 self)
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We suggest an architecture for executing protocols for auctions and, more generally, mechanism design. Our goal is to preserve the privacy of the inputs of the participants (so that no nonessential information about them is divulged, even a posteriori) while maintaining communication and computational efficiency. We achieve this goal by adding another party  the auction issuer  that generates the programs for computing the auctions but does not take an active part in the protocol. The auction issuer is not a trusted party, but is assumed not to collude with the auctioneer. In the case of auctions, barring collusion between the auctioneer and the auction issuer, neither party gains any information about the bids, even after the auction is over. Moreover, bidders can verify that the auction was performed correctly. The protocols do not require any communication between the bidders and the auction issuer and the computational efficiency is very reasonable. This architecture can be used to implement any mechanism design where the important factor is the complexity of the decision procedure.
Truth revelation in approximately efficient combinatorial auctions
 Journal of the ACM
, 2002
"... Abstract. Some important classical mechanisms considered in Microeconomics and Game Theory require the solution of a difficult optimization problem. This is true of mechanisms for combinatorial auctions, which have in recent years assumed practical importance, and in particular of the gold standard ..."
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Cited by 236 (1 self)
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Abstract. Some important classical mechanisms considered in Microeconomics and Game Theory require the solution of a difficult optimization problem. This is true of mechanisms for combinatorial auctions, which have in recent years assumed practical importance, and in particular of the gold standard for combinatorial auctions, the Generalized Vickrey Auction (GVA). Traditional analysis of these mechanisms—in particular, their truth revelation properties—assumes that the optimization problems are solved precisely. In reality, these optimization problems can usually be solved only in an approximate fashion. We investigate the impact on such mechanisms of replacing exact solutions by approximate ones. Specifically, we look at a particular greedy optimization method. We show that the GVA payment scheme does not provide for a truth revealing mechanism. We introduce another scheme that does guarantee truthfulness for a restricted class of players. We demonstrate the latter property by identifying natural properties for combinatorial auctions and showing that, for our restricted class of players, they imply that truthful strategies are dominant. Those properties have applicability beyond the specific auction studied.
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 234 (3 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.
Ad hocVCG: A truthful and costefficient routing protocol for mobile ad hoc networks with selfish agents
, 2003
"... We introduce a gametheoretic setting for routing in a mobile ad hoc network that consists of greedy, selfish agents who accept payments for forwarding data for other agents if the payments cover their individual costs incurred by forwarding data. In this setting, we propose Ad hocVCG, a reactive r ..."
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Cited by 232 (7 self)
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We introduce a gametheoretic setting for routing in a mobile ad hoc network that consists of greedy, selfish agents who accept payments for forwarding data for other agents if the payments cover their individual costs incurred by forwarding data. In this setting, we propose Ad hocVCG, a reactive routing protocol that achieves the design objectives of truthfulness (i.e., it is in the agents ’ best interest to reveal their true costs for forwarding data) and costefficiency (i.e., it guarantees that routing is done along the most costefficient path) in a gametheoretic sense by paying to the intermediate nodes a premium over their actual costs for forwarding data packets. We show that the total overpayment (i.e., the sum of all premiums paid) is relatively small by giving a theoretical upper bound and by providing experimental evidence. Our routing protocol implements a variation of the wellknown mechanism by Vickrey, Clarke, and Groves in a mobile network setting. Finally, we analyze a very natural routing protocol that is an adaptation of the Packet Purse Model [8] with auctions in our setting and show that, unfortunately, it does not achieve costefficiency or truthfulness
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 221 (6 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.
Strategyproof Sharing of Submodular Costs: budget balance versus efficiency
, 1999
"... A service is produced for a set of agents. The service is binary, each agent either receives service or not, and the total cost of service is a submodular function of the set receiving service. We investigate strategyproof mechanisms that elicit individual willingness to pay, decide who is served ..."
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Cited by 198 (18 self)
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A service is produced for a set of agents. The service is binary, each agent either receives service or not, and the total cost of service is a submodular function of the set receiving service. We investigate strategyproof mechanisms that elicit individual willingness to pay, decide who is served, and then share the cost among them. If such a mechanism is budget balanced (covers cost exactly), it cannot be efficient (serve the surplus maximizing set of users) and viceversa. We characterize the rich family of budget balanced and group strategyproof mechanisms; they correspond to the family of cost sharing formulae where an agent's cost share does not decrease when the set of users expand. The mechanism associated with the Shapley value cost sharing formula is characterized by the property that its worst welfare loss is minimal. When we require efficiency rather than budget balance  the more common route in the literature  we find that there is a single ClarkeGroves mech...
Economic mechanism design for computerized agents
 In USENIX workshop on Electronic Commerce
, 1995
"... The field of economic mechanism design has been an active area of research in economics for at least 20 years. This field uses the tools of economics and game theory to design "rules of interaction " for economic transactions that will, in principle, yield some desired outcome. In ..."
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Cited by 195 (1 self)
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The field of economic mechanism design has been an active area of research in economics for at least 20 years. This field uses the tools of economics and game theory to design &quot;rules of interaction &quot; for economic transactions that will, in principle, yield some desired outcome. In this paper I provide an overview of this subject for an audience interested in applications to electronic commerce and discuss some special problems that arise in this context.