Auctions with Severely Bounded Communication

TL;DR

This paper investigates the design of auctions under severe communication constraints, determining optimal mechanisms and analyzing how limited bits affect welfare and profit outcomes.

Contribution

It characterizes the optimal auctions with bounded communication, revealing properties like the effectiveness of interval reporting and the limited benefit of multi-round communication.

Findings

Optimal auctions under communication limits are close in performance to unconstrained ones.

Bidders report valuation intervals rather than exact values in optimal mechanisms.

Multi-round auctions only linearly reduce communication complexity.

Abstract

We study auctions with severe bounds on the communication allowed: each bidder may only transmit t bits of information to the auctioneer. We consider both welfare- and profit-maximizing auctions under this communication restriction. For both measures, we determine the optimal auction and show that the loss incurred relative to unconstrained auctions is mild. We prove non-surprising properties of these kinds of auctions, e.g., that in optimal mechanisms bidders simply report the interval in which their valuation lies in, as well as some surprising properties, e.g., that asymmetric auctions are better than symmetric ones and that multi-round auctions reduce the communication complexity only by a linear factor.