Optimal Diffusion Auctions
Abstract: Diffusion auction design is a new trend in mechanism design for which the main goal is to incentivize existing buyers to invite their neighbors on a social network, to join an auction. With more buyers, a diffusion auction will be able to receive higher revenue. Existing studies have proposed many diffusion auctions to attract more buyers, but the seller's revenue is not optimized. In this study, we investigate what optimal revenue the seller can achieve by attracting more buyers. Different from the traditional setting, the revenue can be achieved highly relies on the structure of the network. We propose a class of mechanisms, where for any given structure, an optimal diffusion mechanism can be found. Moreover, we show that an optimal mechanism that handles all structures does not exist. Therefore, we also propose mechanisms that have bounded approximations of the optimal revenue in all structures.
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