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Incentive-Compatible Diffusion Auctions

Author

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  • Bin Li
  • Dong Hao
  • Dengji Zhao

Abstract

Diffusion auction is a new model in auction design. It can incentivize the buyers who have already joined in the auction to further diffuse the sale information to others via social relations, whereby both the seller's revenue and the social welfare can be improved. Diffusion auctions are essentially non-typical multidimensional mechanism design problems and agents' social relations are complicatedly involved with their bids. In such auctions, incentive-compatibility (IC) means it is best for every agent to honestly report her valuation and fully diffuse the sale information to all her neighbors. Existing work identified some specific mechanisms for diffusion auctions, while a general theory characterizing all incentive-compatible diffusion auctions is still missing. In this work, we identify a sufficient and necessary condition for all dominant-strategy incentive-compatible (DSIC) diffusion auctions. We formulate the monotonic allocation policies in such multidimensional problems and show that any monotonic allocation policy can be implemented in a DSIC diffusion auction mechanism. Moreover, given any monotonic allocation policy, we obtain the optimal payment policy to maximize the seller's revenue.

Suggested Citation

  • Bin Li & Dong Hao & Dengji Zhao, 2020. "Incentive-Compatible Diffusion Auctions," Papers 2001.06975, arXiv.org, revised Apr 2020.
    • Handle: RePEc:arx:papers:2001.06975
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    References listed on IDEAS

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    1. Bin Li & Dong Hao & Dengji Zhao & Tao Zhou, 2018. "Customer Sharing in Economic Networks with Costs," Papers 1807.06822, arXiv.org.
    2. Mu'alem, Ahuva & Nisan, Noam, 2008. "Truthful approximation mechanisms for restricted combinatorial auctions," Games and Economic Behavior, Elsevier, vol. 64(2), pages 612-631, November.
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    6. Takehiro Kawasaki & Nathanael Barrot & Seiji Takanashi & Taiki Todo & Makoto Yokoo, 2019. "Strategy-Proof and Non-Wasteful Multi-Unit Auction via Social Network," Papers 1911.08809, arXiv.org.
    7. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Cited by:

    1. Rangeet Bhattacharyya & Parvik Dave & Palash Dey & Swaprava Nath, 2022. "Optimal Referral Auction Design," Papers 2208.09326, arXiv.org, revised Jul 2023.
    2. Yuhang Guo & Dong Hao & Bin Li, 2022. "Combinatorial Procurement Auction in Social Networks," Papers 2208.14591, arXiv.org.

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