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Incentive-Compatible Diffusion Auctions

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Document pages: 7 pages

Abstract: Diffusion auction is a new model in auction design. It can incentivize thebuyers who have already joined in the auction to further diffuse the saleinformation to others via social relations, whereby both the seller s revenueand the social welfare can be improved. Diffusion auctions are essentiallynon-typical multidimensional mechanism design problems and agents socialrelations are complicatedly involved with their bids. In such auctions,incentive-compatibility (IC) means it is best for every agent to honestlyreport her valuation and fully diffuse the sale information to all herneighbors. Existing work identified some specific mechanisms for diffusionauctions, while a general theory characterizing all incentive-compatiblediffusion auctions is still missing. In this work, we identify a sufficient andnecessary condition for all dominant-strategy incentive-compatible (DSIC)diffusion auctions. We formulate the monotonic allocation policies in suchmultidimensional problems and show that any monotonic allocation policy can beimplemented in a DSIC diffusion auction mechanism. Moreover, given anymonotonic allocation policy, we obtain the optimal payment policy to maximizethe seller s revenue.

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