Ramesh Johari
eBay, Amazon Auctions, etc.
Key feature:
Buyers and sellers have no information
about each other
dont know if you have a lemon until
after you bought the item
George Akerlof considered a
famous model of trading
to investigate such mark

Ramesh Johari
N players
Sn : strategy space of player n
Z : space of outcomes
z(s1, , sN) :
outcome realized when (s1, , sN) is played
n(z) :
payoff to player n when outcome is z
N = 2 wireless devices want to send data
Strategy = transmit power
S1 =

Ramesh Johari
We consider standard auctions where:
Single item is for sale
Each bidder submits a single bid
Highest bidder wins
Any bidder that bids zero makes no payment
Payments are nondecreasing in the bid
(The last two assumptions make our
anal

From the book Networks, Crowds, and Markets: Reasoning about a Highly Connected World.
By David Easley and Jon Kleinberg. Cambridge University Press, 2010.
Complete preprint on-line at http:/www.cs.cornell.edu/home/kleinber/networks-book/
Chapter 9
Auctio

Ramesh Johari
N bidders
Strategies: Sn = [0, ); sn = bid
Rules & outcomes:
High bidder wins, pays second highest bid
Payoffs:
Zero if a player loses
If player n wins and pays tn, then
n = vn - tn
vn : valuation of player n
Theorem:
Truthful biddi

MS&E 233
Ramesh Johari
Problem Set 1
Due: Thursday, April 24, by 5:00 PM in the basement of Huang Eng. Ctr.
Reading. Read Chapter 9 (Auctions) of Networks, Crowds, and Markets by David Easley and
Jon Kleinberg at:
http:/www.cs.cornell.edu/home/kleinber/ne

Ramesh Johari
N players
Sn : strategy space of player n
Z : space of outcomes
z(s1, , sN) :
outcome realized when (s1, , sN) is played
n(z) :
payoff to player n when outcome is z
An outcome z Pareto dominates z if:
n(z) n(z) for all n,
and the inequa

Ramesh Johari
Games
Equilibrium
Players are rational and self-interested:
They will always choose actions that
maximize their payoffs,
given everything they know.
We first focus on static games.
(one-shot games, simultaneous-move games)
For any such g

MS&E 233
Ramesh Johari
Public goods game
A Public Goods Game
In this handout we briey describe the public goods game we played in class.
There are N 2 players.
Each player begins with a private budget of B.
Each player n chooses an amount sn to contrib

MS&E 233
Ramesh Johari
Positive externalities
Informally, an externality is any effect that an individuals decisions have on others, that the individual
has not accounted for in their own decision-making. For example, when you choose which route you are
g

MS&E 233
Ramesh Johari
Negative externalities
In this lecture we consider a game with negative externalities. We consider a game with N players,
where Ai = [0, ) for all i, and:
i (ai , ai ) = i ai ai
j
aj .
Here we assume is nonnegative and strictly inc

Ramesh Johari
Signaling games are two-stage games
where:
Player 1 (with private information)
moves first.
His move is observed by Player 2.
Player 2 (with no knowledge of Player 1s
private information) moves second.
Then payoffs are realized.
Signali

MS&E 233: Lecture 8
eBay
Ramesh Johari
eBay vs. Amazon Auctions
Ockenfels and Roth
eBay vs. Amazon Auctions
When Amazon ran an auction site,
key difference from eBay was the
termination rule:
In Amazon an auction stays open past
expiration time, until