Incentives in Multi-dimensional Auctions under Information Asymmetry for Costs and Qualities

Athanasios Papakonstantinou, Peter Bogetoft

Research output: Chapter in Book/Report/Conference proceedingBook chapterResearchpeer-review

Abstract

This paper discusses the design of a novel multi-dimensional mechanism which allows a principal to procure a single project or an item from multiple suppliers through a two-step payment. The suppliers are capable of producing different qualities at costs which cannot exceed a certain value and the mechanism balances between the costs faced by the suppliers and the benefit the principal achieves from higher qualities. Iniatially, the principal implements a standard second score auction and allocates the project to a single supplier based its reported cost and quality, while then it elicits truthful reporting of the quality by issuing a symmetric secondary payment after observing the winner’s production. We then provide an alternate mechanism in which the principal issues an asymmetric secondary payment which rewards agents for producing higher qualities, while it penalises them for producing lower qualities than they reported. We prove that for both mechanisms truthful revelation of costs and qualities is a dominant strategy (weakly for costs) and that they are immune to combined misreporting of both qualities and costs. We also show that the mechanisms are individually rational, and that the optimal payments received by the winners of the auctions are equal to the payment issued by the standard second score auction.
Original languageEnglish
Title of host publicationAgent-Mediated Electronic Commerce : Designing Trading Strategies and Mechanisms for Electronic Markets
EditorsEster David, Christopher Kiekintveld , Onn Shebory, Sebastian Stein
Place of PublicationHeidelberg
PublisherSpringer Science+Business Media
Publication date2013
Pages104-118
ISBN (Print)9783642408632
ISBN (Electronic)9783642408649
DOIs
Publication statusPublished - 2013
EventJoint Workshop on Trading Agent Design and Analysis (TADA) and Agent-Mediated Electronic Commerce (AMEC): At AAMAS 2012 - Valencia, Spain
Duration: 4 Jun 20124 Jun 2012
http://www.cs.utep.edu/kiekintveld/Workshops/TADAAMEC12.html

Workshop

WorkshopJoint Workshop on Trading Agent Design and Analysis (TADA) and Agent-Mediated Electronic Commerce (AMEC)
CountrySpain
CityValencia
Period04/06/201204/06/2012
Internet address
SeriesLecture Notes in Business Information Processing
Volume136
ISSN1865-1348

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