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[2301.12532] Credible, Optimal Auctions via Blockchains

arxiv.org · 235 words · saved by 1 readers

Akbarpour and Li (2020) formalized credibility as an auction desideratum where the auctioneer cannot benefit by implementing undetectable deviations from the promised auction and showed that, in the plain model, the ascending price auction with reserves is the only credible, strategyproof, revenue-optimal auction. Ferreira and Weinberg (2020) proposed the Deferred Revelation Auction (DRA) as a communication efficient auction that avoids the uniqueness results from Akbarpour and Li (2020) assuming the existence of cryptographic commitments and as long as bidder valuations are MHR. They also showed DRA is not credible in settings where bidder valuations are $\alpha$-strongly regular unless $\alpha > 1$. In this paper, we ask if blockchains allow us to design a larger class of credible auctions. We answer this question positively, by showing that DRA is credible even for $\alpha$-strongly regular distributions for all $\alpha > 0$ if implemented over a secure and censorship-resistant blockchain. We argue ledgers provide two properties that limit deviations from a self-interested auctioneer. First, the existence of smart contracts allows one to extend the concept of credibility to settings where the auctioneer does not have a reputation -- one of the main limitations for the definition of credibility from Akbarpour and Li (2020). Second, blockchains allow us to implement mechanisms over a public broadcast channel, removing the adaptive undetectable deviations driving the negative results of Ferreira and Weinberg (2020).

View PDF HTML (experimental) Abstract:We study auction design in a setting where agents can communicate over a censorship-resistant broadcast channel like the ones we can implement over a public blockchain. We seek to design credible, strategyproof auctions in a model that differs from the traditional mechanism design framework because communication is not centralized via the auctioneer. We prove this allows us to design a larger class of credible auctions where the auctioneer has no incentive to be strategic. Intuitively, a decentralized communication model weakens the auctioneer's…

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