Bayesian and Randomized Clock Auctions

TL;DR

This paper explores how prior information or randomization can improve the performance of clock auctions in single-parameter mechanism design, achieving better social welfare approximations under various information scenarios.

Contribution

It introduces new clock auction mechanisms that attain an $O(\log\log k)$ approximation across different information models, including full, partial, and no prior knowledge.

Findings

Deterministic clock auctions cannot guarantee bounded approximation without prior info.

Randomized clock auctions achieve $O(\log\log k)$ approximation with no prior info.

Simple deterministic auctions perform well with full prior knowledge.

Abstract

In a single-parameter mechanism design problem, a provider is looking to sell a service to a group of potential buyers. Each buyer $i$ has a private value $v_i$ for receiving the service and a feasibility constraint restricts which sets of buyers can be served simultaneously. Recent work in economics introduced clock auctions as a superior class of auctions for this problem, due to their transparency, simplicity, and strong incentive guarantees. Subsequent work focused on evaluating the social welfare approximation guarantees of these auctions, leading to strong impossibility results: in the absence of prior information regarding the buyers' values, no deterministic clock auction can achieve a bounded approximation, even for simple feasibility constraints with only two maximal feasible sets. We show that these negative results can be circumvented by using prior information or by leveraging randomization. We provide clock auctions that give a $O(\log\log k)$ approximation for general downward-closed feasibility constraints with $k$ maximal feasible sets for three different information models, ranging from full access to the value distributions to complete absence of information. The more information the seller has, the simpler these auctions are. Under full access, we use a particularly simple deterministic clock auction, called a single-price clock auction, which is only slightly more complex than posted price mechanisms. In this auction, each buyer is offered a single price and a feasible set is selected among those who accept their offers. In the other extreme, where no prior information is available, this approximation guarantee is obtained using a complex randomized clock auction. In addition to our main results, we propose a parameterization that interpolates between single-price clock auctions and general clock auctions, paving the way for an exciting line of future research.