Characterization of Incentive Compatibility of an Ex-Ante Constrained Player

Bonan Ni; Pingzhong Tang

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arXiv · 2201.11027

Characterization of Incentive Compatibility of an Ex-Ante Constrained Player

Bonan Ni·Pingzhong Tang

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Abstract

We consider a variant of the standard Bayesian mechanism, where players evaluate their outcomes and constraints in an ex-ante manner. Such a model captures a major form of modern online advertising where an advertiser is concerned with her/his expected utility over a time period and her/his type may change over time. We are interested in the incentive compatibility (IC) problem of such Bayesian mechanism. Under very mild conditions on the mechanism environments, we give a full characterization of IC via the taxation principle and show, perhaps surprisingly, that such IC mechanisms are fully characterized by the so-called auto-bidding mechanisms, which are pervasively fielded in the online advertising industry.

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Bonan Ni, Pingzhong Tang. 2022-01-26. Characterization of Incentive Compatibility of an Ex-Ante Constrained Player. https://arxiv.org/abs/2201.11027

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