The groupwise-pivotal referral mechanism: Core-selecting referral strategy-proof mechanism

SE Jeong, J Lee - … Referral Strategy-Proof Mechanism (April 13 …, 2020 - papers.ssrn.com
Joosung, The Groupwise-Pivotal Referral Mechanism: Core-Selecting …, 2020papers.ssrn.com
We introduce the groupwise-pivotal referral (GPR) mechanism for auctions where buyers
can participate only through referrals. Each buyer's type consists of a valuation and referable
buyers. Unlike the second-price auction (SPA), the Vickrey-Clarke-Groves (VCG)
mechanism provides referral incentives. However, VCG is not budget-feasible. In contrast,
GPR is core-selecting, implying efficiency and budget feasibility. In GPR, bidders should
refer truthfully and have no incentive to underbid. GPR is shill-proof and groupwise collusion …
Abstract
We introduce the groupwise-pivotal referral (GPR) mechanism for auctions where buyers can participate only through referrals. Each buyer's type consists of a valuation and referable buyers. Unlike the second-price auction (SPA), the Vickrey-Clarke-Groves (VCG) mechanism provides referral incentives. However, VCG is not budget-feasible. In contrast, GPR is core-selecting, implying efficiency and budget feasibility. In GPR, bidders should refer truthfully and have no incentive to underbid. GPR is shill-proof and groupwise collusion-proof. Furthermore, GPR's ex-post revenue outperforms both VCG and SPA in undominated strategies. We also study more general environments than auctions.
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