Price Manipulability in First-Price Auctions
Johannes Brustle, Paul D\"utting, Balasubramanian Sivan

TL;DR
This paper investigates how vulnerable first-price auctions are to strategic manipulation, especially in large multi-unit settings, providing conditions under which they become effectively truthful as the number of buyers increases.
Contribution
It offers the first rigorous analysis of manipulation susceptibility in large multi-unit first-price auctions using a specific metric, revealing surprising boundaries of truthfulness.
Findings
Manipulation impact diminishes as the number of buyers grows under certain conditions.
The study identifies specific conditions where large multi-unit auctions tend to be truthful.
Surprising boundaries of manipulation susceptibility are characterized in the analysis.
Abstract
First-price auctions have many desirable properties, including uniquely possessing some, like credibility. However, first-price auctions are also inherently non-truthful, and non-truthfulness may result in instability and inefficiencies. Given these pros and cons, we seek to quantify the extent to which first-price auctions are susceptible to manipulation. In this work we adopt a metric that was introduced in the context of bitcoin fee design markets: the percentage change in payment that can be achieved by being strategic. We study the behavior of this metric for single-unit and -unit auction environments with i.i.d. buyers, and seek conditions under which the percentage change tends to zero as grows large. To the best of our knowledge, ours is the first rigorous study of the extent to which large multi-unit first price auctions are susceptible to manipulation. We provide an…
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Taxonomy
TopicsAuction Theory and Applications · Consumer Market Behavior and Pricing · Blockchain Technology Applications and Security
