Optimal and Robust Mechanism Design with Interdependent Values

Tim Roughgarden, Inbal Talgam-Cohen
2016 ACM Transactions on Economics and Computation  
We study interdependent value settings [Milgrom and Weber 1982] and extend several fundamental results from the well-studied independent private values model to these settings. For revenue-optimal mechanism design, we give conditions under which Myerson's virtual value-based mechanism remains optimal with interdependent values. One of these conditions is robustness of the truthfulness and individual rationality guarantees, in the sense that they are required to hold ex post. We then consider an
more » ... We then consider an even more robust class of mechanisms called "prior independent" (a.k.a. "detail free"), and show that by simply using one of the bidders to set a reserve price, it is possible to extract near-optimal revenue in an interdependent values setting. This shows that a considerable level of robustness is achievable for interdependent values in singleparameter environments.
doi:10.1145/2910577 fatcat:6xo7wcfun5dmfaeftegl52spbi