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Computationally feasible VCG mechanisms (2000)
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| Venue: | In Proceedings of the Second ACM Conference on Electronic Commerce (EC’00 |
| Citations: | 216 - 6 self |
BibTeX
@INPROCEEDINGS{Nisan00computationallyfeasible,
author = {Noam Nisan and Amir Ronen},
title = {Computationally feasible VCG mechanisms},
booktitle = {In Proceedings of the Second ACM Conference on Electronic Commerce (EC’00},
year = {2000},
pages = {242--252}
}
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Abstract
A major achievement of mechanism design theory is a general method for the construction of truthful mechanisms called VCG. When applying this method to complex problems such as combinatorial auctions, a difficulty arises: VCG mechanisms are required to compute optimal outcomes and are therefore computationally infeasible. However, if the optimal outcome is replaced by the results of a sub-optimal algorithm, the resulting mechanism (termed VCGbased) is no longer necessarily truthful. The first part of this paper studies this phenomenon in depth and shows that it is near universal. Specifically, we prove that essentially all reasonable approximations or heuristics for combinatorial auctions as well as a wide class of cost minimization problems yield non-truthful VCG-based mechanisms. We generalize these results for affine maximizers. The second part of this paper proposes a general method for circumventing the above problem. We introduce a modification of VCG-based mechanisms in which the agents are given a chance to improve the output of the underlying algorithm. When the agents behave truthfully, the welfare obtained by the mechanism is at least as good as the one obtained by the algorithm’s output. We provide a strong rationale for truth-telling behavior. Our method satisfies individual rationality as well.
Keyphrases
feasible vcg mechanism optimal outcome general method combinatorial auction second part truth-telling behavior first part sub-optimal algorithm vcg mechanism non-truthful vcg-based mechanism reasonable approximation cost minimization problem paper study major achievement affine maximizers strong rationale wide class method satisfies individual rationality truthful mechanism algorithm output mechanism design theory underlying algorithm vcg-based mechanism
