Oblivious Dynamic Mechanism Design

34 Pages Posted: 23 Nov 2016  

Vahab Mirrokni

Google, Inc.

Renato Paes Leme

Google, Inc.

Pingzhong Tang

Tsinghua University

Song Zuo

Tsinghua University

Date Written: November 16, 2016

Abstract

Despite their better revenue and welfare guarantees for repeated auctions, dynamic mechanisms have not been widely adopted in practice. This is partly due to their computational and implementation complexity, and also due to their unrealistic use of forecasting for future periods. We address the above shortcomings and present a new family of dynamic mechanisms that are computationally efficient and do not use any distribution knowledge of future periods. Our contributions are three-fold:

1. We present the first polynomial-time dynamic incentive-compatible and ex-post individually rational mechanism for multiple periods and for any number of buyers that is a constant approximation to the optimal revenue. Unlike previous mechanisms, we require no expensive pre-processing step and in each period we run a simple auction that is a combination of virtual value maximizing auctions.

2. We introduce the concept of obliviousness in dynamic mechanism design. A dynamic mechanism is oblivious if the allocation and pricing rule at each period does not depend on the type distributions in future periods. Our mechanism is oblivious and guarantees a 5-approximation compared to the optimal mechanism that knows all the distributions in advance.

3. We develop a framework for characterizing, designing, and proving lower bounds for dynamic mechanisms (oblivious or not). In addition to the aforementioned positive results, we use this characterization to show that no oblivious mechanism can produce a better-than-2 approximation to the mechanism that knows all the distributions.

Keywords: Dynamic Mechanism Design, Bank Account Mechanisms, Obliviousness, Dynamic Auctions, Approximations, Internet Advertising

JEL Classification: D44, C73, D82

Suggested Citation

Mirrokni, Vahab and Paes Leme, Renato and Tang, Pingzhong and Zuo, Song, Oblivious Dynamic Mechanism Design (November 16, 2016). Available at SSRN: https://ssrn.com/abstract=2873701 or http://dx.doi.org/10.2139/ssrn.2873701

Vahab Mirrokni

Google, Inc. ( email )

1600 Amphitheatre Parkway
Second Floor
Mountain View, CA 94043
United States

Renato Paes Leme

Google, Inc. ( email )

1600 Amphitheatre Parkway
Second Floor
Mountain View, CA 94043
United States

Pingzhong Tang

Tsinghua University ( email )

Beijing, 100084
China

Song Zuo (Contact Author)

Tsinghua University ( email )

Beijing, 100084
China

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