Simplicity-Expressiveness Tradeoffs in Mechanism Design

TL;DR

This paper explores the tradeoff between simplicity and expressiveness in mechanism design, analyzing how restricted message spaces impact outcomes in sponsored and combinatorial auctions, with the role of information availability being crucial.

Contribution

It provides a comparative analysis of simplicity-expressiveness tradeoffs in two key auction settings, highlighting the influence of information on mechanism performance.

Findings

Simplified mechanisms can prevent bad equilibria or promote good ones.

Restrictions on message space can reduce welfare and revenue.

Information availability significantly affects the tradeoff outcomes.

Abstract

A fundamental result in mechanism design theory, the so-called revelation principle, asserts that for many questions concerning the existence of mechanisms with a given outcome one can restrict attention to truthful direct revelation-mechanisms. In practice, however, many mechanism use a restricted message space. This motivates the study of the tradeoffs involved in choosing simplified mechanisms, which can sometimes bring benefits in precluding bad or promoting good equilibria, and other times impose costs on welfare and revenue. We study the simplicity-expressiveness tradeoff in two representative settings, sponsored search auctions and combinatorial auctions, each being a canonical example for complete information and incomplete information analysis, respectively. We observe that the amount of information available to the agents plays an important role for the tradeoff between simplicity and expressiveness.