Auctions for Digital Goods Ali Echihabi University of Waterloo – Nov 2004

Nov 2004Auction for Digital Goods - Ali Echihabi2 Talk Overview  Review of four papers.  New context, new approach.  Focus on: “Competitive Auctions”, Goldberg, Hartline, Karlin,Wright, Saks.  Extra: experiments and extensions.  Discussion.

Nov 2004Auction for Digital Goods - Ali Echihabi3 Our Context  Unlimited supply. Identical goods (digital).  Utilities may vary a lot.  Allocation no longer a problem. Pricing is.  Holds for bounded supply.  Why auctions then?

Nov 2004Auction for Digital Goods - Ali Echihabi4 New Approach  What CS people do best!  Algorithms are like auctions: Correctness : Truthfulness Efficiency: Time Performance: Revenue  New concepts for auctions: Provable performance guarantees. Over all possible inputs.

Nov 2004Auction for Digital Goods - Ali Echihabi5 Competitive Auctions  Bayesian can go wrong.  Run detail-free auctions.  Quantify the value of information: How much revenue did we miss? What metric do we use?

Nov 2004Auction for Digital Goods - Ali Echihabi6 Benchmark  Two metrics:  Maximum possible ever.  You sell at bidder’s valuation.  Multi-price.  Optimal price-fixing.  Single-price for all bidders.  We use this one.

Nov 2004Auction for Digital Goods - Ali Echihabi7 Definitions

Nov 2004Auction for Digital Goods - Ali Echihabi8 Definitions (2)

Nov 2004Auction for Digital Goods - Ali Echihabi9 Bid-independent Auction

Nov 2004Auction for Digital Goods - Ali Echihabi10 Important Result  Deterministic Auctions are not competitive. Symmetric: outcome is independent of the order of the bids.  Need to consider Randomized.

Nov 2004Auction for Digital Goods - Ali Echihabi11 Randomized Auctions  Lower Bound:  Random Sampling: 1. Dual-Price Sampling Optimal Threshold (DOST) 2. Sampling Cost Sharing (SCS).

Nov 2004Auction for Digital Goods - Ali Echihabi12 Definition of DOST

Nov 2004Auction for Digital Goods - Ali Echihabi13 Properties of DOST  Truthful.  More is better:  Best DOST can do is 4-competitive.

Nov 2004Auction for Digital Goods - Ali Echihabi14 Definition of SCS  Special case of Moulin-Shenker mechanism  A.k.a Consensus Revenue Estimate (CORE)

Nov 2004Auction for Digital Goods - Ali Echihabi15 Properties of SCS  Truthful.  4-competitive.  May lose half of potential profit: Pick a ratio r < 1. Competitive ratio grows: 4/r.  Only sells if revenue reachable.

Nov 2004Auction for Digital Goods - Ali Echihabi16 Important Result: is good  Competitive auctions do not outperform: Considering all possible inputs.

Nov 2004Auction for Digital Goods - Ali Echihabi17 Results Summary  No truthful deterministic auction is competitive.  Several randomized auctions are truthful and competitive.  is a good benchmark.

Nov 2004Auction for Digital Goods - Ali Echihabi18 Experiments: Number of Bids

Nov 2004Auction for Digital Goods - Ali Echihabi19 Experiments: Sample Size

Nov 2004Auction for Digital Goods - Ali Echihabi20 Experiments: Sample Size (2)

Nov 2004Auction for Digital Goods - Ali Echihabi21 Extensions: Online vs Offline  Paper borrows concepts from online algorithms  That doesn’t make the auction online: Decide the price of current bid before next bid arrives [3]

Nov 2004Auction for Digital Goods - Ali Echihabi22 Extensions: Envy  Bidder X rejected. Bidder Y wins and pays a price lower than X’s bid.  Envy is bad for seller.  No constant-competitive truthful auction is envy- free.  Relax constraints. CORE: Consensus Revenue Estimate (or SCS) Truthful, envy-free, competitive, group-strategy proof

Nov 2004Auction for Digital Goods - Ali Echihabi23 Extensions: Online vs. Offline  Using theory for online algorithms doesn’t make your auction online.  Online auction: determine price for bid i, before next bid arrives.  Can’t make all pricing decisions at once  [3] gives a randomized online competitive auction within

Nov 2004Auction for Digital Goods - Ali Echihabi24 Excellent References  [1]: “Competitive Auctions”, Goldberg, Hartline, Karlin, Wright, Saks.  [2]: “Competitive Auctions and Digital Goods”, Goldberg, Hartline, Wrigth.  [3]: “Incentive-Compatible Online Auctions for Digital Goods”, Bar-Yossef, Hildrum, Wu.  [4]: “Envy-Free Auctions for Digital Goods”, Goldberg, Hartline.

Nov 2004Auction for Digital Goods - Ali Echihabi25 Thank you! Discussion