Preventing Strategic Manipulation in Iterative Auctions: Proxy Agents and Price-Adjustment

David C. Parkes and Lyle H. Ungar, University of Pennsylvania

Iterative auctions have many computational advantages over sealed-bid auctions, but can present new possibilities for strategic manipulation. We propose a two-stage technique to make iterative auctions that compute optimal allocations with myopic best-response bidding strategies more robust to manipulation. First, introduce proxy bidding agents to constrain bidding strategies to (possibly untruthful) myopic best-response. Second, after the auction terminates adjust the prices towards those given in the Vickrey auction, a sealed-bid auction in which truth-revelation is optimal. We present an application of this methodology to iBundle, an iterative combinatorial auction which gives optimal allocations for myopic best-response agents.

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