Auctioning with Strategically Reticent Bidders
Abstract
Classic mechanism design often assumes that a bidder’s action is restricted to report a type or a signal,
possibly untruthfully. In today’s digital economy, bidders are holding increasing amount of private
information about the auctioned items. And due to legal or ethical concerns, they would demand to reveal
partial but truthful information, as opposed to report untrue signal or misinformation. To accommodate
such bidder behaviors in auction design, we propose and study a novel mechanism design setup where
each bidder holds two kinds of information: (1) private value type, which can be misreported; (2) private
information variable, which the bidder may want to conceal or partially reveal, but importantly, not to
misreport. We refer to bidders with such behaviors as strategically reticent bidders. Among others, one
direct motivation of our model is the ad auction in which many ad platforms today elicit from each bidder
not only their private value per conversion but also their private information about Internet users (e.g.,
their conversion history) in order to improve the platform’s estimation of all bidders’ conversion rates.
We show that in this new setup, it is still possible to design mechanisms that are both Incentive and
Information Compatible (IIC). We develop two different black-box transformations, which convert any
mechanism M for classic bidders to a mechanism M′
for strategically reticent bidders, based on either
outcome of expectation or expectation of outcome, respectively. We identify properties of the original
mechanismMunder which the transformation leads to IIC mechanismsM′
. Interestingly, as corollaries
of these results, we show that running VCG with expected bidder values maximizes welfare whereas the
mechanism using expected outcome of Myerson’s auction maximizes revenue. Finally, we study how
regulation on the auctioneer’s usage of information may lead to more robust mechanisms.
possibly untruthfully. In today’s digital economy, bidders are holding increasing amount of private
information about the auctioned items. And due to legal or ethical concerns, they would demand to reveal
partial but truthful information, as opposed to report untrue signal or misinformation. To accommodate
such bidder behaviors in auction design, we propose and study a novel mechanism design setup where
each bidder holds two kinds of information: (1) private value type, which can be misreported; (2) private
information variable, which the bidder may want to conceal or partially reveal, but importantly, not to
misreport. We refer to bidders with such behaviors as strategically reticent bidders. Among others, one
direct motivation of our model is the ad auction in which many ad platforms today elicit from each bidder
not only their private value per conversion but also their private information about Internet users (e.g.,
their conversion history) in order to improve the platform’s estimation of all bidders’ conversion rates.
We show that in this new setup, it is still possible to design mechanisms that are both Incentive and
Information Compatible (IIC). We develop two different black-box transformations, which convert any
mechanism M for classic bidders to a mechanism M′
for strategically reticent bidders, based on either
outcome of expectation or expectation of outcome, respectively. We identify properties of the original
mechanismMunder which the transformation leads to IIC mechanismsM′
. Interestingly, as corollaries
of these results, we show that running VCG with expected bidder values maximizes welfare whereas the
mechanism using expected outcome of Myerson’s auction maximizes revenue. Finally, we study how
regulation on the auctioneer’s usage of information may lead to more robust mechanisms.
Research Areas
