Making Auctions Robust to Aftermarkets

4/20/23 | 4:15pm | E25-111





Nicole Immorlica

Senior Principal Researcher
Microsoft Research

Abstract: A prevalent assumption in auction theory is that the auctioneer has full control over the market and that the allocation she dictates is final. In practice, however, agents might be able to resell acquired items in an aftermarket. A prominent example is the market for carbon emission allowances. These allowances are commonly allocated by the government using uniform-price auctions, and firms can typically trade these allowances among themselves in an aftermarket that may not be fully under the auctioneer's control. While the uniform-price auction is approximately efficient in isolation, we show that speculation and resale in aftermarkets might result in a significant welfare loss. Motivated by this issue, we consider three approaches, each ensuring high equilibrium welfare in the combined market. The first approach is to adopt smooth auctions such as discriminatory auctions. This approach is robust to correlated valuations and to participants acquiring information about others' types. However, discriminatory auctions have several downsides, notably that of charging bidders different prices for identical items, resulting in fairness concerns that make the format unpopular. Two other approaches we suggest are either using posted-pricing mechanisms, or using uniform-price auctions with anonymous reserves. We show that when using balanced prices, both these approaches ensure high equilibrium welfare in the combined market. The latter also inherits many of the benefits from uniform-price auctions such as price discovery, and can be introduced with a minor modification to auctions currently in use to sell carbon emission allowances.

Joint work with Moshe Babaioff, Yingkai Li, and Brendan Lucier.

Bio: Nicole Immorlica is a senior principal researcher at Microsoft Research New England (MSR NE) where she leads the economics and computation group. She is also chair of SIGecom, the ACM Special Interest Group on Economics and Computation, which fosters world-class research in this interdisciplinary field through conferences, awards, and mentorship programs. She received her BS in 2000, MEng in 2001 and PhD in 2005 in theoretical computer science from MIT in Cambridge, MA. She joined MSR NE in 2012 after completing postdocs at Microsoft in Redmond, WA and Centruum vor Wiskunde en Informatics (CWI) in Amsterdam, Netherlands, and a professorship in computer science at Northwestern University. Nicole’s research interest is in the design and operation of sociotechnical systems. Using tools and modeling concepts from both theoretical computer science and economics, Nicole hopes to explain, predict, and shape behavioral patterns in various online and offline systems, markets, and games. She is known for her work on social networks, matching markets, and mechanism design. She is the recipient of a number of fellowships and awards including the Sloan Fellowship, the Microsoft Faculty Fellowship and the NSF CAREER Award. She has been on several boards including SIGACT, the Game Theory Society, and OneChronos; is an associate editor of Operations Research and Transactions on Economics and Computation, and was program committee member and chair for several ACM, IEEE and INFORMS conferences in her area.

Event Time: 

2023 - 16:15