Diffusion Mechanism Design in Tree-Structured Social Network

TL;DR

This paper introduces a fixed-price auction mechanism for tree-structured markets that incentivizes buyer participation and invites, with proven rationality and incentives, and demonstrates high practical efficiency through theoretical and simulation analyses.

Contribution

It presents a novel fixed-price auction mechanism tailored for tree-structured social networks, ensuring individual rationality and incentive compatibility.

Findings

Mechanism is individual rational and incentive compatible.

Achieves a high approximation ratio to the optimal auction.

Validated effectiveness through theoretical analysis and Monte-Carlo simulations.

Abstract

We design a fixed-price auction mechanism for a seller to sell multiple items in a tree-structured market. The buyers have independently drawn valuation from a uniform distribution, and the seller would like to incentivize buyers to invite more people to the auction. We prove that our mechanism is individual rational, and incentivize compatible with regard to the buyers' action. Furthermore, we show the approximation ratio of our mechanism to the optimal fixed-price auction in two ways, theoretically and via Monte-Carlo simulation, and show a high practical ratio. Finally, we discuss several factors affecting the behavior of our mechanism and its feasibility in reality.