Auctions with Untrustworthy Bidders

Braynov, Sviatoslav, and Pavlov, Radoslav. "Auctions with Untrustworthy Bidders." Serdica Journal of Computing 1.3 (2007): 293-312. <http://eudml.org/doc/11427>.

@article{Braynov2007,
abstract = {The paper analyzes auctions which are not completely enforceable. In such auctions, economic agents may fail to carry out their obligations, and parties involved cannot rely on external enforcement or control mechanisms for backing up a transaction. We propose two mechanisms that make bidders directly or indirectly reveal their trustworthiness. The first mechanism is based on discriminating bidding schedules that separate trustworthy from untrustworthy bidders. The second mechanism is a generalization of the Vickrey auction to the case of untrustworthy bidders. We prove that, if the winner is considered to have the trustworthiness of the second-highest bidder, truthfully declaring one's trustworthiness becomes a dominant strategy. We expect the proposed mechanisms to reduce the cost of trust management and to help agent designers avoid many market failures caused by lack of trust.},
author = {Braynov, Sviatoslav, Pavlov, Radoslav},
journal = {Serdica Journal of Computing},
keywords = {Auctions; E-commerce; Mechanism Design; Trust; auctions; e-commerce; mechanism design; trust},
language = {eng},
number = {3},
pages = {293-312},
publisher = {Institute of Mathematics and Informatics Bulgarian Academy of Sciences},
title = {Auctions with Untrustworthy Bidders},
url = {http://eudml.org/doc/11427},
volume = {1},
year = {2007},
}

TY - JOUR
AU - Braynov, Sviatoslav
AU - Pavlov, Radoslav
TI - Auctions with Untrustworthy Bidders
JO - Serdica Journal of Computing
PY - 2007
PB - Institute of Mathematics and Informatics Bulgarian Academy of Sciences
VL - 1
IS - 3
SP - 293
EP - 312
AB - The paper analyzes auctions which are not completely enforceable. In such auctions, economic agents may fail to carry out their obligations, and parties involved cannot rely on external enforcement or control mechanisms for backing up a transaction. We propose two mechanisms that make bidders directly or indirectly reveal their trustworthiness. The first mechanism is based on discriminating bidding schedules that separate trustworthy from untrustworthy bidders. The second mechanism is a generalization of the Vickrey auction to the case of untrustworthy bidders. We prove that, if the winner is considered to have the trustworthiness of the second-highest bidder, truthfully declaring one's trustworthiness becomes a dominant strategy. We expect the proposed mechanisms to reduce the cost of trust management and to help agent designers avoid many market failures caused by lack of trust.
LA - eng
KW - Auctions; E-commerce; Mechanism Design; Trust; auctions; e-commerce; mechanism design; trust
UR - http://eudml.org/doc/11427
ER -