Achieving allocatively-efficient and strongly budget-balanced mechanisms in the network flow domain for bounded-rational agents

Authors:
Yoram Bachrach;Jeffrey S. Rosenschein
Affiliations:
Hebrew University, Jerusalem, Israel;Hebrew University, Jerusalem, Israel
Venue:
AMEC'05 Proceedings of the 2005 international conference on Agent-Mediated Electronic Commerce: designing Trading Agents and Mechanisms
Year:
2005

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Abstract

Vickrey-Clarke-Groves (VCG) mechanisms are a well-known framework for finding a solution to a distributed optimization problem in systems of self-interested agents. VCG mechanisms have received wide attention in the AI community because they are efficient and strategy-proof; a special case of the Groves family of mechanisms, VCG mechanisms are the only direct-revelation mechanisms that are allocatively efficient and strategy-proof. Unfortunately, VCG mechanisms are only weakly budget-balanced. We consider self-interested agents in a network flow domain, and show that in this domain, it is possible to design a mechanism that is both allocatively-efficient and almost completely budget-balanced. This is done by choosing a mechanism that is not strategy-proof but rather strategy-resistant. Instead of using the VCG mechanism, we propose a mechanism in which finding the most beneficial manipulation is an NP-complete problem, and the payments from the agents to the mechanism may be minimized as much as desired. This way, the mechanism is virtually strongly budget-balanced: for any ε 0, we find a mechanism that is ε-budget-balanced.