Optimal Platform Design
Abstract
An auction house cannot generally provide the optimal auction technology to every client. Instead it provides one or several auction technologies, and clients select the most appropriate one. For example, eBay provides ascending auctions and "buy-it-now" pricing. For each client the offered technology may not be optimal, but it would be too costly for clients to create their own. We call these mechanisms, which emphasize generality rather than optimality, platform mechanisms. A platform mechanism will be adopted by a client if its performance exceeds that of the client's outside option, e.g., hiring (at a cost) a consultant to design the optimal mechanism. We ask two related questions. First, for what costs of the outside option will the platform be universally adopted? Second, what is the structure of good platform mechanisms? We answer these questions using a novel prior-free analysis framework in which we seek mechanisms that are approximately optimal for every prior.
Cite
@article{arxiv.1412.8518,
title = {Optimal Platform Design},
author = {Jason D. Hartline and Tim Roughgarden},
journal= {arXiv preprint arXiv:1412.8518},
year = {2014}
}
Comments
There is some overlap between this paper and the paper "Optimal Mechanism Design and Money Burning," which appeared in the STOC 2008 conference and as arXiv:0804.2097. However, the focus of this paper is different, with some of our earlier results omitted and several new results included