Information, Interaction and Mechanism Design

In this Focus Group, Hans Fischer Senior Fellow Prof. Dirk Bergemann (Yale University) collaborates with his hosts Prof. Martin Bichler and Prof. Felix Brandt (Decision Sciences and Systems, TUM).

Understanding and modeling markets has always played a central role in Economics, and it can probably be described as the central topic in Economics. Rather than modeling markets from a bird's-eye view, mechanism design was a very successful strand of Economic theory where incentives of individual decision makers are modeled explicitly. A number of recent Nobel Memorial Prizes in Economic Sciences document the success of this stream of research and this specific way of modeling markets.
In the recent years, the formal study of mechanism design has found concrete applications in the real world. It led to market designs in various fields such as spectrum auctions, procurement tenders, or kidney exchanges where multiple independent decision makers need to be coordinated such that the outcomes is economically efficient and the mechanisms are robust to various forms of manipulation. Mechanism design and game theory also had a fundamental impact on computer science and operations research, where problems were typically modeles from the point of view of a central decision maker. Solving complex planning problems in revenue management, scheduling, or transportation has led to a substantial amount of research at the intersection of Computer Science, Economics, and Management Science in the recent years.

While mechanism design theory was incredibly successful as a formal way to model markets, its scope is also restricted. The overall project tries to advance the theory of mechanism design in three imporant ways:

  • traditional auction theory is based on the assumption of a common prior distribution among all bidders. Such assumptions can rarely be found in the field, which is why equilibrium strategies derived for simple first price auctions are often a poor guideline for practitioners. We draw on recent advances on robust mechanism design by Bergemann and Morris (2013) to develop alternative models for first price auctions.
  • mechanism design has typically focused on static, one-time decisions such as isolated markets where all bidders are present at the same time. Dynamic mechanism design focuses on a sequence of interdependent decisions. The classic airline revenue management problem is a nice example, where an airline must decide how to price seats on a flight over a certain time frame in response to changing inventory and customer demand. Market participants arrive and depart over time and both, the maximization of efficiency and the maximization of seller revenue in such environments is still an open issue. We focus on a continuous time perspective in this research rather than the discrete-time models which have been developed so far.
  • the network structure of interactions among decision makers has often been ignored in the theory of mechanism design. An explicit consideration of network structures can help better understand the volatility of actions of agents in financial markets.

TUM-IAS funded doctoral candidate:
Florian Brandl (PhD in 2018), Decision Sciences and Systems

Publications by the Focus Group

2018

  • Bichler, Martin; Fux, Vladimir; Goeree, Jacob: A Matter of Equality: Linear Pricing in Combinatorial Exchanges. Information Systems Research 29 (4), 2018, 1024-1043 more…
  • Brandl, Florian; Brandt, Felix; Eberl, Manuel; Geist, Christian: Proving the Incompatibility of Efficiency and Strategyproofness via SMT Solving. Journal of the ACM 65 (2), 2018, 1-28 more…

2017

  • Bergemann, Dirk; Brooks, Benjamin; Morris, Stephen: First-Price Auctions With General Information Structures: Implications for Bidding and Revenue. Econometrica 85 (1), 2017, 107-143 more…
  • Bergemann, Dirk; Morris, Stephen: Belief-free rationalizability and informational robustness. Games and Economic Behavior 104, 2017, 744-759 more…
  • Bergemann, Dirk; Morris, Stephen; Takahashi, Satoru: Interdependent preferences and strategic distinguishability. Journal of Economic Theory 168, 2017, 329-371 more…
  • Bichler, Martin; Goeree, Jacob K.: Frontiers in spectrum auction design. International Journal of Industrial Organization 50, 2017, 372-391 more…
  • Bichler, Martin; Hao, Zhen; Adomavicius, Gediminas: Coalition-Based Pricing in Ascending Combinatorial Auctions. Information Systems Research 28 (1), 2017, 159-179 more…
  • Bichler, Martin; Waldherr, Stefan: Core and pricing equilibria in combinatorial exchanges. Economics Letters 157, 2017, 145-147 more…
  • Brandl, Florian: The distribution of optimal strategies in symmetric zero-sum games. Games and Economic Behavior 104, 2017, 674-680 more…
  • Diebold, Franz; Bichler, Martin: Matching with indifferences: A comparison of algorithms in the context of course allocation. European Journal of Operational Research 260 (1), 2017, 268-282 more…
  • Fadaei, Salman; Bichler, Martin: Generalized assignment problem: Truthful mechanism design without money. Operations Research Letters 45 (1), 2017, 72-76 more…
  • Fadaei, Salman; Bichler, Martin: A Truthful Mechanism for the Generalized Assignment Problem. ACM Transactions on Economics and Computation 5 (3), 2017, 1-18 more…

2016

  • Bergemann, Dirk; Morris, Stephen: Information Design, Bayesian Persuasion, and Bayes Correlated Equilibrium. American Economic Review 106 (5), 2016, 586-591 more…
  • Bergemann, Dirk; Morris, Stephen: Bayes correlated equilibrium and the comparison of information structures in games. Theoretical Economics 11 (2), 2016, 487-522 more…
  • Brandl, Florian; Brandt, Felix; Seedig, Hans Georg: Consistent Probabilistic Social Choice. Econometrica 84 (5), 2016, 1839-1880 more…
  • Brandl, Florian; Brandt, Felix; Suksompong, Warut: The impossibility of extending random dictatorship to weak preferences. Economics Letters 141, 2016, 44-47 more…
  • F. Brandl, F. Brandt, and C. Geist: Proving the incompatibility of efficiency and strategyproofness via SMT solving. IJCAI'16 Proceedings of the Twenty-Fifth International Joint Conference on Artificial Intelligence, 2016 more…

2015

  • Guler, Kemal; Bichler, Martin; Petrakis, Ioannis: Ascending Combinatorial Auctions with Risk Averse Bidders. Group Decision and Negotiation 25 (3), 2015, 609-639 more…