Private From Whom? Minimal Information Leakage in Auctions

TL;DR

This paper explores the balance of information privacy in auction protocols, identifying those that minimize information leakage to both bidders and the auctioneer while maintaining the auction's social choice rule.

Contribution

It characterizes the Privacy Frontier in deterministic bilateral communication protocols for auctions and proposes new protocols that optimize privacy trade-offs.

Findings

First-price auction protocols on the Privacy Frontier include descending and sealed-bid protocols.

Second-price auction protocols on the Privacy Frontier include ascending and ascending-join protocols.

The paper provides conditions for protocols to be on the Privacy Frontier and designs alternative protocols for privacy trade-offs.

Abstract

In many auctions, bidders may be reluctant to reveal private information to the auctioneer and other bidders. Among deterministic bilateral communication protocols, reducing what bidders learn requires increasing what the auctioneer learns. A protocol implementing a given social choice rule is on the Privacy Frontier if no alternative protocol reveals less to both bidders and the auctioneer. For first-price auctions, the descending protocol and the sealed-bid protocol are both on the Privacy Frontier. For second-price auctions, the ascending protocol and the ascending-join protocol of Haupt and Hitzig (2025) are both on the Privacy Frontier, but the sealed-bid protocol is not. We provide sufficient conditions for a protocol to be on the Privacy Frontier and devise alternative protocols on the Privacy Frontier for first-price auctions that allow the designer to flexibly trade off between privacy from bidders and the auctioneer.