# Diffusion and Auction on Graphs

## TL;DR

This paper introduces a new class of incentive-compatible auction mechanisms on social graphs that enhance revenue and efficiency by encouraging information diffusion among buyers, surpassing traditional auction models.

## Contribution

It formally defines a novel auction class on social graphs where diffusion promotes better outcomes, expanding the scope of auction theory.

## Key findings

- Diffusion mechanisms improve seller revenue and allocation efficiency.
- The proposed class outperforms traditional Vickrey auctions.
- Information diffusion mechanisms can be optimized for better auction outcomes.

## Abstract

Auction is the common paradigm for resource allocation which is a fundamental problem in human society. Existing research indicates that the two primary objectives, the seller's revenue and the allocation efficiency, are generally conflicting in auction design. For the first time, we expand the domain of the classic auction to a social graph and formally identify a new class of auction mechanisms on graphs. All mechanisms in this class are incentive-compatible and also promote all buyers to diffuse the auction information to others, whereby both the seller's revenue and the allocation efficiency are significantly improved comparing with the Vickrey auction. It is found that the recently proposed information diffusion mechanism is an extreme case with the lowest revenue in this new class. Our work could potentially inspire a new perspective for the efficient and optimal auction design and could be applied into the prevalent online social and economic networks.