Mechanism design for stochastic optimization problems

Authors:
Samuel Ieong;Mukund Sundararajan;Anthony Man-Cho So
Affiliations:
Stanford University;Stanford University;Chinese University of Hong Kong
Venue:
ACM SIGecom Exchanges
Year:
2007

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Abstract

We identify and address algorithmic and game-theoretic issues arising from welfare maximization in the well-studied two-stage stochastic optimization framework. In contrast, prior work in algorithmic mechanism design has focused almost exclusively on optimization problems without uncertainty. We show both positive results, by demonstrating a mechanism that implements the social welfare maximizer in sequential ex post equilibrium, and also negative results, by showing the impossibility of dominant-strategy implementation. In this letter, we describe the relationship between mechanism design and stochastic optimization, and highlight our key technical results. An extended abstract will appear in WINE 2007, and a journal version is under preparation.