Problem
Research questions and friction points this paper is trying to address.
order auctions
private preferences
unit-demand bidders
efficient allocation
position preferences
Order Auctions with Private Position Preferences
🤖 AI Summary
This study addresses the efficient allocation of two ranked positions among heterogeneous unit-demand bidders—specifically, specialists who value only the top position and generalists with no positional preference. Under private and heterogeneous position preferences, the paper analyzes the standard first-price auction and proposes a winner-pays mechanism augmented with preference declarations. The main contributions are threefold: it establishes, for the first time, that achieving ex post efficiency in deterministic, single-round, discrete-bid auctions requires at least one additional bit of communication; demonstrates that while the standard first-price auction cannot guarantee full efficiency across all types, it attains at least half of the optimal social welfare uniformly over all distributions; and shows that incorporating preference declarations improves this guarantee to \(1 - 1/e\), with applicability extending to settings such as priority service and blockchain transaction ordering.
📝 Abstract
We study auctions where two positions are sold to unit-demand bidders with private heterogeneous order preferences: some are specialists who value only the first position, while others are generalists who are indifferent between the two. First, we consider a standard first-price rule which allocates the first and second items to the highest and second-highest bidders, respectively. We show that no strategy profile ex-post implements the efficient allocation at every type profile, irrespective of payments, and provide a distribution-free equilibrium welfare guarantee of $\frac{1}{2}$. To augment this result, we prove that for deterministic one-round auctions and discrete bids, the efficient allocation requires each bidder to communicate at least one bit more than its bid's binary representation. We next ask what the same bit accomplishes in winner-pays-bid formats where bidders can also specify specific item preferences. In particular, we show that this strengthens our distribution-free equilibrium welfare guarantee to $1-\frac{1}{e}$. Finally, we discuss our results' applicability to priority service auctions and blockchain transaction sequencing.
Innovation
Methods, ideas, or system contributions that make the work stand out.
order auctions
private position preferences
communication complexity
equilibrium welfare guarantee
winner-pays-bid
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