Mechanism Design Ruta Mehta Game design not video
- Slides: 35
Mechanism Design Ruta Mehta
Game design (not video games!) to achieve a desired goal, like fairness, social welfare maximization, etc.
Widely Applicable
Lets Focus on Voting • -> Condorcet’s Paradox!
First Preference Majority • Tie between a and c
Borda Count •
In General: Social Choice •
Desired Properties of f •
Gibbard-Satterthwaite Theorem: If a social choice function is incentivecompatible, where |A|>=3, then it is dictatorship. “Field of Mechanism Design attempts escaping from this impossibility result using various modifications in the model. ”
Introducing Payment •
Auction • Not even IC
Vickery Auction is IC (in DS) Proof on board
Open-Outcry Auctions • English Auction: Start with a low price and keep increasing until only one buyer is interested. – Equivalent to Vickery auction! • Dutch Auction: Start with a very high price where no one is interested. Keep decreasing until someone gets interested. – Equivalent to first price auction!
Extensions? •
General Setting •
Example: Single Item Auction •
Vickery-Clarke-Groves Mechanism •
Properties of VCG Proof on board •
Clarke Pivot Rule • Others welfare without i Others welfare with i
Example: Single Item Auction •
Example: Multiunit Auction •
Example: Reverse Auction •
Example: Resource Allocation •
Example: Multi Item Auction •
Incentive Compatible •
Pros and Cons of VCG • Best for bidders – Government auctions like road contract, bandwidth allocation • May not be efficiently computable – Multi item auction • Worst for auctioneer – May get zero payment!
Sponsored Search Auctions
Ad Auctions • Generalized Second Price (GSP) – Google, Yahoo, Bing • Bid on keywords – If the user query contains your keyword, your bid qualifies for the auction
GSP Auction Setting •
GSP Auction •
GSP Properties •
Locally Envy Free Equilibrium •