Mechanism Design for Single Leader Stackelberg Problems and Application to Procurement Auction Design

Garg, Dinesh and Narahari, Y (2008) Mechanism Design for Single Leader Stackelberg Problems and Application to Procurement Auction Design. In: IEEE Transactions on Automation Science and Engineering, 5 (3). pp. 377-393.

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Abstract

In this paper, we focus on mechanism design for single leader Stackelberg problems, which are a special case of hierarchical decision making problems in which a distinguished agent, known as the leader, makes the first move and this action is followed by the actions of the remaining agents, which are known as the followers. These problems are also known as single leader rest follower (SLRF) problems. There are many examples of such problems in the areas of electronic commerce, supply chain management, manufacturing systems, distributed computing, transportation networks, and multiagent systems. The game induced among the agents for these problems is a Bayesian Stackelberg game, which is more general than a Bayesian game. For this reason, classical mechanism design, which is based on Bayesian games, cannot be applied as is for solving SLRF mechanism design problems. In this paper, we extend classical mechanism design theory to the specific setting of SLRF problems. As a significant application of the theory developed, we explore two examples from the domain of electronic commerce—first-price and second-price electronic procurement auctions with reserve prices. Using an SLRF model for these auctions, we derive certain key results using the SLRF mechanism design framework developed in this paper. The theory developed has many promising applications in modeling and solving emerging game theoretic problems in engineering.

Item Type:	Journal Article
Publication:	IEEE Transactions on Automation Science and Engineering
Publisher:	IEEE
Additional Information:	Copyright 2008 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE.
Keywords:	Bayesian games;Bayesian Stackelberg games;incentive compatibility;mechanism design;procurement auctions with reserve prices;single leader rest follower (SLRF) games;Stackelberg equilibrium.
Department/Centre:	Division of Electrical Sciences > Computer Science & Automation
Date Deposited:	04 Aug 2008
Last Modified:	19 Sep 2010 04:48
URI:	http://eprints.iisc.ac.in/id/eprint/15423

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