Title: Truthful Outcomes from Non-Truthful Position Auctions
Abstract: Adding to a long list of properties that explain why the VCG mechanism is rarely used in practice, we exhibit a relative lack of robustness to inaccuracies in the choice of its parameters. For a standard position auction environment in which the auctioneer may not know the precise relative values of the positions, we show that under both complete and incomplete information a non-truthful mechanism supports the truthful outcome of the VCG mechanism for a wider range of these values than the VCG mechanism itself. The result for complete information concerns the generalized second-price mechanism and lends additional support to Google¹s use of this mechanism for ad placement. Particularly interesting from a technical perspective is the case of incomplete information, where a surprising equivalence involving binomial coefficients helps us to avoid confrontation with an unwieldy differential equation.
Joint work with Felix Fischer and David C. Parkes.