Peer Selection with Friends and Enemies

TL;DR

This paper investigates designing incentive-compatible mechanisms for selecting agents based on binary traits, considering social relationships like friends and enemies, and characterizes conditions for mechanism efficiency under different knowledge scenarios.

Contribution

It provides conditions for the existence of efficient, dominant strategy incentive compatible mechanisms considering social ties and characterizes outcomes under structural balance.

Findings

Efficient DSIC mechanisms exist when relationships are known.

No efficient DSIC mechanism exists when relationships are unknown.

Structural balance enables sharp characterization of mechanisms.

Abstract

A planner wants to select one agent out of n agents on the basis of a binary characteristic that is commonly known to all agents but is not observed by the planner. Any pair of agents can either be friends or enemies or impartials of each other. An individual's most preferred outcome is that she be selected. If she is not selected, then she would prefer that a friend be selected, and if neither she herself or a friend is selected, then she would prefer that an impartial agent be selected. Finally, her least preferred outcome is that an enemy be selected. The planner wants to design a dominant strategy incentive compatible mechanism in order to be able choose a desirable agent. We derive sufficient conditions for existence of efficient and DSIC mechanisms when the planner knows the bilateral relationships between agents. We also show that if the planner does not know these relationships, then there is no efficient and DSIC mechanism and we compare the relative efficiency of two ``second-best'' DSIC mechanisms. Finally, we obtain sharp characterization results when the network of friends and enemies satisfies structural balance.