# Auctioning with Strategically Reticent Bidders

Jibang Wu, Ashwinkumar Badanidiyuru and Haifeng Xu

Papers from arXiv.org

Abstract: Classic mechanism design often assumes that a bidder's action is restricted to report a type or a signal, possibly untruthfully. In today's digital economy, bidders are holding increasing amount of private information about the auctioned items. And due to legal or ethical concerns, they would demand to reveal partial but truthful information, as opposed to report untrue signal or misinformation. To accommodate such bidder behaviors in auction design, we propose and study a novel mechanism design setup where each bidder holds two kinds of information: (1) private \emph{value type}, which can be misreported; (2) private \emph{information variable}, which the bidder may want to conceal or partially reveal, but importantly, \emph{not} to misreport. We show that in this new setup, it is still possible to design mechanisms that are both \emph{Incentive and Information Compatible} (IIC). We develop two different black-box transformations, which convert any mechanism $\mathcal{M}$ for classic bidders to a mechanism $\mathcal{M}'$ for strategically reticent bidders, based on either outcome of expectation or expectation of outcome, respectively. We identify properties of the original mechanism $\mathcal{M}$ under which the transformation leads to IIC mechanisms $\mathcal{M}'$. Interestingly, as corollaries of these results, we show that running VCG with expected bidder values maximizes welfare whereas the mechanism using expected outcome of Myerson's auction maximizes revenue. Finally, we study how regulation on the auctioneer's usage of information may lead to more robust mechanisms.

Date: 2021-09
New Economics Papers: this item is included in nep-des, nep-gth, nep-isf and nep-mic
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