Willy Wonka Mechanisms
Bounded rationality in mechanism design aims to ensure incentive-compatibility for agents who are cognitively limited. These agents lack the contingent reasoning skills that traditional mechanism design assumes, and depending on how these cognitive limitations are modelled this alters the class of i...
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Main Authors | , , |
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Format | Journal Article |
Language | English |
Published |
13.02.2024
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Subjects | |
Online Access | Get full text |
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Summary: | Bounded rationality in mechanism design aims to ensure
incentive-compatibility for agents who are cognitively limited. These agents
lack the contingent reasoning skills that traditional mechanism design assumes,
and depending on how these cognitive limitations are modelled this alters the
class of incentive-compatible mechanisms. In this work we design mechanisms
without any "obvious" manipulations for several auction settings that aim to
either maximise revenue or minimise the compensation paid to the agents. A
mechanism without obvious manipulations is said to be "not obviously
manipulable" (NOM), and assumes agents act truthfully as long as the maximum
and minimum utilities from doing so are no worse than the maximum and minimum
utilities from lying, with the extremes taken over all possible actions of the
other agents. We exploit the definition of NOM by introducing the concept of
"golden tickets" and "wooden spoons", which designate bid profiles ensuring the
mechanism's incentive-compatibility for each agent. We then characterise these
"Willy Wonka" mechanisms, and by carefully choosing the golden tickets and
wooden spoons we use this to design revenue-maximising auctions and frugal
procurement auctions. |
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DOI: | 10.48550/arxiv.2402.08314 |