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TR11-170 | 16th December 2011 08:51

#### On Optimal Multi-Dimensional Mechanism Design

TR11-170
Authors: Constantinos Daskalakis, S. Matthew Weinberg
Publication: 16th December 2011 08:51
Keywords:

Abstract:

We efficiently solve the optimal multi-dimensional mechanism design problem for independent bidders with arbitrary demand constraints when either the number of bidders is a constant or the number of items is a constant. In the first setting, we need that each bidder's values for the items are sampled from a possibly correlated, item-symmetric distribution, allowing different distributions for each bidder. In the second setting, we allow the values of each bidder for the items to be arbitrarily correlated, but assume that the distribution of bidder types is bidder-symmetric. These symmetric distributions include i.i.d. distributions, as well as many natural correlated distributions. E.g., an item-symmetric distribution can be obtained by taking an arbitrary distribution, and "forgetting" the names of items; this could arise when different members of a bidder population have various sorts of correlations among the items, but the items are "the same" with respect to a random bidder from the population.

For all $\epsilon>0$, we obtain a computationally efficient additive $\epsilon$-approximation, when the value distributions are bounded, or a multiplicative $(1-\epsilon)$-approximation when the value distributions are unbounded, but satisfy the Monotone Hazard Rate condition, covering a widely studied class of distributions in Economics. Our running time is polynomial in $\max\{\text{\#items,\#bidders}\}$, and not the size of the support of the joint distribution of all bidders' values for all items, which is typically exponential in both the number of items and the number of bidders. Our mechanisms are randomized, explicitly price bundles, and in some cases can also accommodate budget constraints.

Our results are enabled by establishing several new tools and structural properties of Bayesian mechanisms. In particular, we provide a symmetrization technique that turns any truthful mechanism into one that has the same revenue and respects all symmetries in the underlying value distributions. We also prove that item-symmetric mechanisms satisfy a natural strong-monotonicity property which, unlike cyclic-monotonicity, can be harnessed algorithmically. Finally, we provide a technique that turns any given $\epsilon$-BIC mechansism (i.e. one where incentive constraints are violated by $\epsilon$) into a truly-BIC mechanism at the cost of $O(\sqrt{\epsilon})$ revenue. We expect our tools to be used beyond the settings we consider here. Indeed there has already been follow-up research~\cite{CDW,CJ} making use of our tools.

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