Incentive-Compatible Collusion-Resistance via Posted Prices

TL;DR

This paper refines collusion-resistance in transaction fee mechanisms by ensuring incentive compatibility and individual rationality, characterizing the class of posted-price mechanisms that prevent profitable collusion, and analyzing their welfare and revenue impacts.

Contribution

It introduces a new refinement of collusion-resistance requiring incentive compatibility and individual rationality, and characterizes the class of such mechanisms as posted-prices with manageable levels.

Findings

Characterizes collusion-resistant, incentive-compatible mechanisms as posted-prices.

Shows these mechanisms are optimal when prices are not prohibitively high.

Analyzes welfare and revenue effects for different distribution types.

Abstract

We consider a refinement to the notions of collusion-resistance in transaction fee mechanisms. In particular, we require that the collusion is by itself incentive-compatible and individually rational to all of its participants. We then study the structural properties of these notions, and importantly, characterize the class of collusion-resistant and incentive-compatible transaction fee mechanisms in the single bidder case, and show that this is exactly the class of posted-price where the price is not too prohibitive. We analyze welfare and revenue implications, as well as the shape of the solution space, for both regular and non-regular distributions.