Envy, truth, and profit

  • Authors:
  • Jason Hartline;Qiqi Yan

  • Affiliations:
  • Northwestern University, Evanston, IL, USA;Stanford University, Stanford, CA, USA

  • Venue:
  • Proceedings of the 12th ACM conference on Electronic commerce
  • Year:
  • 2011

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Abstract

We consider profit maximizing (incentive compatible) mechanism design in general environments that include, e.g., position auctions (for selling advertisements on Internet search engines) and single-minded combinatorial auctions. We analyze optimal envy-free pricings in these settings, and give economic justification for using the optimal revenue of envy-free pricings as a benchmark for prior-free mechanism design and analysis. Moreover, we show that envy-free pricing has a simple nice structure and a strong connection to incentive compatible mechanism design, and we exploit this connection to design prior-free mechanisms with strong approximation guarantees.