Private From Whom? Minimal Information Leakage in Auctions

2025-11-13

AI Summary

This paper investigates the trade-off between private information leakage and efficiency in auction mechanisms, focusing on interactions between bidders and the auctioneer. We introduce the concept of the *privacy Pareto frontier* and develop a formal framework for deterministic bilateral communication protocols, unifying social choice rule implementation with minimal information leakage. By rigorously comparing multiple protocols—first-price and second-price sealed-bid, Dutch (descending), English (ascending), and ascending-with-entry—we establish that Dutch and sealed-bid first-price auctions both lie on the privacy Pareto frontier, whereas sealed-bid second-price auctions are strictly dominated: ascending and its variants achieve significantly lower leakage for both parties. This work provides the first systematic characterization of the privacy-efficiency boundary for auction protocols, exposing the structural privacy limitations of conventional sealed-bid designs. It establishes foundational theory and concrete protocol optimization pathways for privacy-sensitive mechanism design.

Technology Category

• Game Theory and Economic Paradigms: Auctions and Market-Based Systems
• Multiagent Systems: Mechanism Design
• Machine Learning: Privacy

Application Category

• Security and Privacy: Privacy-enhancing technologies
• Economics, Online Markets and Human Computation: Fairness, privacy, and diversity in economic environments
• User Modeling, Personalization and Recommendation: User privacy protection in personalized systems

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 Pareto 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 Pareto frontier. For second-price auctions, the ascending protocol and the ascending-join protocol of Haupt and Hitzig (2025) are both on the privacy Pareto frontier, but the sealed-bid protocol is not. A designer can flexibly trade off between what bidders learn and what the auctioneer learns by"stitching"different protocols together.

Problem

• Minimizing information leakage to bidders and auctioneers in auctions
• Identifying privacy Pareto frontier protocols for first-price auctions
• Determining optimal privacy trade-offs for second-price auction mechanisms

Innovation

• Protocols minimize information leakage to auction participants
• Pareto frontier balances bidder and auctioneer privacy trade-offs
• Stitching protocols enables flexible privacy-utility optimization