Multi-Unit Diffusion Auctions with Intermediaries

TL;DR

This paper introduces a diffusion-based auction framework for multi-unit auctions with intermediaries, aiming to incentivize information sharing among intermediaries and improve social welfare and seller revenue.

Contribution

It proposes a novel critical neighborhood auction mechanism that enhances seller revenue while maximizing social welfare in networked intermediary settings.

Findings

VCG mechanism achieves maximum social welfare but may reduce revenue.

Critical neighborhood auction improves seller revenue compared to VCG.

The framework effectively incentivizes information diffusion among intermediaries.

Abstract

This paper studies multi-unit auctions powered by intermediaries, where each intermediary owns a private set of unit-demand buyers and all intermediaries are networked with each other. Our goal is to incentivize the intermediaries to diffuse the auction information to individuals they can reach, including their private buyers and neighboring intermediaries, so that more potential buyers are able to participate in the auction. To this end, we build a diffusion-based auction framework which incorporates the strategic interaction of intermediaries. It is showed that the classic Vickrey-Clarke-Groves (VCG) mechanism within the framework can achieve the maximum social welfare, but it may decrease the seller's revenue or even lead to a deficit. To overcome the revenue issue, we propose a novel auction, called critical neighborhood auction, which not only maximizes the social welfare, but also improves the seller's revenue comparing to the VCG mechanism with/without intermediaries.