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Shill-Proof Auctions

Author

Listed:
  • Andrew Komo
  • Scott Duke Kominers
  • Tim Roughgarden

Abstract

In an auction, a seller may masquerade as one or more bidders in order to manipulate the clearing price. We characterize single-item auction formats that are shill-proof in the sense that a profit-maximizing seller has no incentive to submit shill bids. We distinguish between strong shill-proofness, in which a seller with full knowledge of bidders' valuations can never profit from shilling, and weak shill-proofness, which requires only that the expected equilibrium profit from shilling is nonpositive. The Dutch auction (with a suitable reserve) is the unique (revenue-)optimal and strongly shill-proof auction. Moreover, the Dutch auction (with no reserve) is the unique prior-independent auction that is both efficient and weakly shill-proof. While there are multiple ex-post incentive compatible, weakly shill-proof, and optimal auctions; any optimal auction can satisfy only two properties in the set {static, ex-post incentive compatible, weakly shill-proof}.

Suggested Citation

  • Andrew Komo & Scott Duke Kominers & Tim Roughgarden, 2024. "Shill-Proof Auctions," Papers 2404.00475, arXiv.org, revised Nov 2024.
    • Handle: RePEc:arx:papers:2404.00475
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    References listed on IDEAS

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