Redistribution of VCG payments in public project problems

Authors:
Victor Naroditskiy;Mingyu Guo;Lachlan Dufton;Maria Polukarov;Nicholas R. Jennings
Affiliations:
School of Electronics and Computer Science, University of Southampton, UK;Computer Science Department, University of Liverpool, UK;Cheriton School of Computer Science, University of Waterloo, Canada;School of Electronics and Computer Science, University of Southampton, UK;School of Electronics and Computer Science, University of Southampton, UK
Venue:
WINE'12 Proceedings of the 8th international conference on Internet and Network Economics
Year:
2012

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Abstract

Redistribution of VCG payments has been mostly studied in the context of resource allocation. This paper focuses on another fundamental model--the public project problem. In this scenario, the VCG mechanism collects in payments up to $\frac{n-1}{n}$ of the total value of the agents. This collected revenue represents a loss of social welfare. Given this, we study how to redistribute most of the VCG revenue back to the agents. Our first result is a bound on the best possible efficiency ratio, which we conjecture to be tight based on numerical simulations. Furthermore, the upper bound is confirmed on the case with 3 agents, for which we derive an optimal redistribution function. For more than 3 agents, we turn to heuristic solutions and propose a new approach to designing redistribution mechanisms.