The groupwise-pivotal referral auction: Core-selecting referral strategy-proof mechanism

Jeong, Seungwon (Eugene) and Joosung Lee

Games and Economic Behavior, 2024, vol. 143, issue C, 191-203

Abstract: We introduce the groupwise-pivotal referral (GPR) mechanism for auctions where buyers can participate through referrals. Each buyer's type consists of a valuation and referable buyers. Unlike the second-price auction (SPA), the Vickrey-Clarke-Groves (VCG) mechanism provides referral incentives. However, VCG is not budget-feasible. In contrast, under complete information, GPR is core-selecting, implying efficiency and budget feasibility. Under incomplete information, bidders refer truthfully and have no incentive to underbid in GPR. Furthermore, GPR's ex-post revenue outperforms both VCG and SPA, not just in equilibrium but also when bidders do not use weakly dominated strategies.

Keywords: Referral network; Referral strategy-proofness; Budget feasibility; Core; Shill-proofness; Groupwise collusion-proofness; Referrer's dilemma (search for similar items in EconPapers)
JEL-codes: D44 D71 D82 L14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:143:y:2024:i:c:p:191-203

DOI: 10.1016/j.geb.2023.11.012

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