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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.

We consider the problem of selecting a low cost s − t path in a graph, where the edge costs are a secret known only to the various economic agents who own them. To solve this problem, Nisan and Ronen applied the celebrated Vickrey-Clarke-Groves (VCG) mechanism, which pays a premium to induce the edges to reveal their costs truthfully. We observe that this premium can be unacceptably high. There are simple instances where the mechanism pays Θ(k) times the actual cost of the path, even if there is an alternate path available that costs only (1 + ɛ) times as much. This inspires the frugal path problem, which is to design a mechanism that selects a path and induces truthful cost revelation without paying such a high premium. This paper contributes negative results on the frugal path problem. On two large classes of graphs, including ones having three node-disjoint s − t paths, we prove that no reasonable mechanism can always avoid paying a high premium to induce truthtelling. In particular, we introduce a general class of min function mechanisms, and show that all min function mechanisms can be forced to overpay just as badly as VCG. On the other hand, we prove that (on two large classes of graphs) every truthful mechanism satisfying some reasonable properties is a min function mechanism. 1

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AbstractWe study the problem of optimizing the performance of a system shared by selfish, noncooperative users. We consider the concrete setting of scheduling jobs on a set of shared machines with load-dependent latency functions specifying the length of time necessary to complete a job; we measure system performance by the total latency of the system. Assigning jobs according to the selfish interests of individual users (who wish to minimize only the latency that their own jobs experience) typically results in suboptimal system performance. However, in many systems of this type there is a mixture of "selfishly controlled " and "centrally controlled " jobs; as the assignment of centrally controlled jobs will influence the subsequent actions by selfish users, we aspire to contain the degradation in system performance due to selfish behavior by scheduling the centrally controlled jobs in the best possible way. We formulate this goal as an optimization problem via Stackelberg games, games in which one player acts a leader (here, the centralized authority interested in optimizing system performance) and the rest as followers (the selfish users). The problem is then to compute a strategy for the leader (a Stackelberg strategy) that induces the followers to react in a way that (at least approximately) minimizes the total latency in the system. In this paper, we prove that it is NP-hard to compute the optimal Stackelberg strategy and present simple strategies with provable performance guarantees. More precisely, we give a simple algorithm that computes a strategy inducing a job assignment with total latency no more than a constant times that of the optimal assignment of all of the jobs; in the absence of centrally controlled jobs and a Stackelberg strategy, no result of this type is possible. We also prove stronger performance guarantees in the special case where every machine latency function is linear in the machine load.

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. 1

We describe mechanisms for auctions that are simultaneously truthful (alternately known as strategy-proof or incentive-compatible) and guarantee high "net" profit. We make use of appropriate variants of competitive analysis of algorithms in designing and analyzing our mechanisms. Thus, we do not require any probabilistic assumptions on bids. We present

We study the negative consequences of selfish behavior in a congested network and economic means of influencing such behavior. We consider the model of selfish routing defined by Wardrop [30] and studied in a computer science context by Roughgarden and Tardos [26]. In this model, the latency experienced by network traffic on an edge of the network is a function of the edge congestion, and network users are assumed to selfishly route traffic on minimum-latency paths. The quality of a routing of traffic is measured by the sum of travel times (the total latency).

We give a general technique to obtain approximation mechanisms that are truthful in expectation. We show that for packing domains, any α-approximation algorithm that also bounds the integrality gap of the LP relaxation of the problem by α can be used to construct an α-approximation mechanism that is truthful in expectation. This immediately yields a variety of new and significantly improved results for various problem domains and furthermore, yields truthful (in expectation) mechanisms with guarantees that match the best known approximation guarantees when truthfulness is not required. In particular, we obtain the first truthful mechanisms with approximation guarantees for a variety of multiparameter domains. We obtain truthful (in expectation) mechanisms achieving approximation guarantees of O ( √ m) for combinatorial auctions (CAs), (1 + ɛ) for multi-unit CAs with B = Ω(log m) copies of each item, and 2 for multi-parameter knapsack problems (multi-unit auctions). Our construction is based on considering an LP relaxation of the problem and using the classic VCG [33, 9, 18] mechanism to obtain a truthful mechanism in this fractional domain. We argue that the (fractional) optimal solution scaled down by α, where α is the integrality gap of the problem, can be represented as a convex combination of integer solutions, and by viewing this convex combination as specifying a probability distribution over integer solutions, we get a randomized, truthful in expectation mechanism. Our construction can be seen as a way of exploiting VCG in a computational tractable way even when the underlying social-welfare maximization problem is NP-hard. 1

This paper deals with the design of efficiently computable incentive compatible, or truthful, mechanisms for combinatorial optimization problems with multi-parameter agents. We focus on approximation algorithms for NP-hard mechanism design problems. These algorithms need to satisfy certain monotonicity properties to ensure truthfulness. Since most of the known approximation techniques do not fulfill these properties, we study alternative techniques. Our first contribution is a quite general method to transform a pseudopolynomial algorithm into a monotone FPTAS. This can be applied to various problems like, e.g., knapsack, constrained shortest path, or job scheduling with deadlines. For example, the monotone FPTAS for the knapsack problem gives a very efficient, truthful mechanism for single-minded multi-unit auctions. The best previous result for such auctions was a 2-approximation. In addition,