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 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.

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 3-approximation mechanism based on randomized rounding of the optimal fractional solution. This problem is NP-complete, and the standard approximation algorithms (greedy load-balancing 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.

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Generalized Vickrey mechanisms have received wide attention in the literature because they are efficient and strategyproof, i.e. truthful bidding is optimal whatever the bids of other agents. However it is well-known that it is impossible for an exchange, with multiple buyers and sellers, to be efficient and budget-balanced, even putting strategy-proofness to one side. A market-maker in an efficient exchange must make more payments than it collects. We enforce budget-balance as a hard constraint, and explore payment rules to distribute surplus after an exchange clears to minimize distance to Vickrey payments. Different rules lead to different levels of truthrevelation and efficiency. Experimental and theoretical analysis suggest a simple Threshold scheme, which gives surplus to agents with payments further than a certain threshold value from their Vickrey payments. The scheme appears able to exploit agent uncertainty about bids from other agents to reduce manipulation and boost allocative efficiency in comparison with other simple rules.

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We consider auction design in a setting with costly preference elicitation. We motivate the role of proxy agents, that are situated between bidders and the auction, and maintain partial information about agent preferences and compute equilibrium bidding strategies based on the available information. The proxy agents can also elicit additional preference information incrementally during an auction. We show that indirect mechanisms, such as proxied ascending-price auctions, can achieve better allocative efficiency with less preference elicitation than direct mechanisms, such as sealed-bid auctions.

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This paper is meant to familiarize the audience with some of the fundamental results in the theory of implementation and provide a quick progression to some open questions in the literature.

We introduce a class of voting rules called generalized scoring rules. Under such a rule, each vote generates a vector of k scores, and the outcome of the voting rule is based only on the sum of these vectors—more specifically, only on the order (in terms of score) of the sum’s components. This class is extremely general: we do not know of any commonly studied rule that is not a generalized scoring rule. We then study the coalitional manipulation problem for gener-alized scoring rules. We prove that under certain natural assump-), then tions, if the number of manipulators is O(n p) (for any p < 1 2 the probability that a random profile is manipulable is O(n p − 1 2), where n is the number of voters. We also prove that under another set of natural assumptions, if the number of manipulators is Ω(n p) (for any p> 1) and o(n), then the probability that a random pro-2 file is manipulable (to any possible winner under the voting rule) is 1 − O(e −Ω(n2p−1)). We also show that common voting rules satisfy these conditions (for the uniform distribution). These results generalize earlier results by Procaccia and Rosenschein as well as even earlier results on the probability of an election being tied.

This paper addresses the problem of constructing voting protocols that are hard to manipulate. We describe a general technique for obtaining a new protocol by combining two or more base protocols, and study the resulting class of (vote-once) hybrid voting protocols, which also includes most previously known manipulationresistant protocols. We show that for many choices of underlying base protocols, including some that are easily manipulable, their hybrids are NP-hard to manipulate, and demonstrate that this method can be used to produce manipulationresistant protocols with unique combinations of useful features. 1