Corruption in Auctions: Social Welfare Loss in Hybrid Multi-Unit Auctions

TL;DR

This paper analyzes how corruption by auctioneers impacts social welfare in hybrid multi-unit auctions, providing tight bounds on the price of anarchy under various corruption schemes and equilibrium assumptions.

Contribution

It introduces a model for auctioneer corruption in multi-unit auctions and derives tight bounds on the robust price of anarchy for these settings.

Findings

Bound on the robust POA of $oldsymbol{oldsymbol{ ext{γ-FPA}}}$ is tight for all γ.

No-overbidding assumptions lead to more precise POA bounds.

Almost tight bounds are established for various auction and equilibrium types.

Abstract

We initiate the study of the social welfare loss caused by corrupt auctioneers, both in single-item and multi-unit auctions. In our model, the auctioneer may collude with the winning bidders by letting them lower their bids in exchange for a (possibly bidder-dependent) fraction $\gamma$ of the surplus. We consider different corruption schemes. In the most basic one, all winning bidders lower their bid to the highest losing bid. We show that this setting is equivalent to a $\gamma$-hybrid auction in which the payments are a convex combination of first-price and the second-price payments. More generally, we consider corruption schemes that can be related to $\gamma$-approximate first-price auctions ($\gamma$-FPA), where the payments recover at least a $\gamma$-fraction of the first-price payments. Our goal is to obtain a precise understanding of the robust price of anarchy (POA) of such auctions. If no restrictions are imposed on the bids, we prove a bound on the robust POA of $\gamma$-FPA which is tight (over the entire range of $\gamma$) for the single-item and the multi-unit auction setting. On the other hand, if the bids satisfy the no-overbidding assumption a more fine-grained landscape of the price of anarchy emerges, depending on the auction setting and the equilibrium notion. Albeit being more challenging, we derive (almost) tight bounds for both auction settings and several equilibrium notions, basically leaving open some (small) gaps for the coarse-correlated price of anarchy only.