Magazine: Features: Incentivizing Truthfulness
Do Humans Play Equilibrium? Modeling Human Behavior in Computational Strategic Systems
Online auctions and other computational strategic systems where human users interact are usually analyzed based on the assumptions that the users are rational and reach an equilibrium. This article shows that these modeling assumptions lead to significant errors, and that using behaviorally appropriate assumptions is important for achieving credible predictions in such systems.
Do Humans Play Equilibrium? Modeling Human Behavior in Computational Strategic Systems
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Jargon
GSP
Generalized Second-Price Auction (GSP) is a non-truthful auction mechanism for multiple ranked slots. Each bidder places a single bid. The highest bidder is allocated the best slot and is charged according to the bid of the second-highest bidder, the second-highest bidder is allocated the second-best slot and is charged according to the bid of the third-highest bidder, and so on. A classic application is Google AdWords.
Generalized Second-Price Auction (GSP) is a non-truthful auction mechanism for multiple ranked slots. Each bidder places a single bid. The highest bidder is allocated the best slot and is charged according to the bid of the second-highest bidder, the second-highest bidder is allocated the second-best slot and is charged according to the bid of the third-highest bidder, and so on. A classic application is Google AdWords.
VCG
Vickrey-Clarke-Groves Auction (VCG) is a type of sealed-bid auction of multiple items. Every bidder submits their true valuation of the items, which is unknown to other bidders. The system assigns the items in a socially optimal manner, that is, it charges each individual according to the harm they cause to other bidders.
Vickrey-Clarke-Groves Auction (VCG) is a type of sealed-bid auction of multiple items. Every bidder submits their true valuation of the items, which is unknown to other bidders. The system assigns the items in a socially optimal manner, that is, it charges each individual according to the harm they cause to other bidders.