Computational Mechanism Design Optimal Auction Design

The ability of agent mediated electronic marketplaces

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Unformatted text preview: rtners. The ability of agent-mediated electronic marketplaces to e ciently allocate resources will be highly dependent on the complexity of the decision problems that agents face; determined in part by the structure of the marketplace, resource characteristics, and the nature of agents' local problems. While many of the costs that are associated with traditional auctions, such as the cost of participation making bids and watching the progress of an auction, are unimportant in agent-mediated electronic auctions, the cost of valuation remains important 17 . The value of a good is often uncertain, and an accurate valuation can require that an agent solves a hard optimization problem, or interacts with a busy and expensive human expert. In fact, electronic markets may make the valuation problem more di cult, because of mitigating factors such as decreased aggregation, increased product di erentiation, and increased dynamics 1, 4, 5 . In this paper we compare auction performance for agents that have hard local problems, and uncertain values for goods. Just as careful market design can reduce the complexity of the bidding problem, for example by providing incentives for agents to reveal their true value for a good 28 , careful market design can also reduce the loss in e ciency that is associated with agents that have hard valuation problems. Unlike the bidding problem, market design can not simplify the valuation problem itself. However market design can improve the quality of an agent's decisions about when to reason about the value of a good. A well structured marketplace can provide information to enable the right" agents to deliberate for the right" amount of time. Roughly, agents with high values should deliberate more than agents with low values. For example, consider a bidding agent that participates in an on-line auction for a ight to Stockholm, initialized by a user with a lower bound v on value. The user does not know her exact value for the ight, but nds it relatively easy...
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