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The cost of incentive compatibility in auction‐based mechanisms for carrier collaboration
Author(s) -
Gansterer Margaretha,
Hartl Richard F.,
Vetschera Rudolf
Publication year - 2019
Publication title -
networks
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.977
H-Index - 64
eISSN - 1097-0037
pISSN - 0028-3045
DOI - 10.1002/net.21828
Subject(s) - incentive compatibility , computer science , combinatorial auction , incentive , compatibility (geochemistry) , common value auction , interdependence , mechanism design , microeconomics , rationality , vickrey–clarke–groves auction , payment , subsidy , bundle , operations research , economics , auction theory , mathematics , market economy , materials science , geochemistry , world wide web , political science , law , composite material , geology
Collaboration has been one of the important trends in vehicle routing. A typical mechanism to enable carrier collaboration is to use combinatorial auctions, where requests are not traded individually but are combined into bundles. Previous literature on carrier collaboration has focused on issues such as bundle formation or winner determination, typically assuming truthfulness of all agents and absence of any strategic behavior. This article considers the interdependencies and problems that arise from bidders acting as buyers and sellers of requests at the same time. From standard auction theory, desirable properties of exchange mechanisms are identified as efficiency, incentive compatibility, individual rationality, and budget balance. It is shown that these desirable properties cannot be fulfilled at the same time. In particular, the properties efficiency and incentive compatibility induce that budget balance is violated, that is, an outside subsidy is required. We propose two incentive compatible exchange mechanisms. One is more closely related to the classical VCG approach, while the other one uses a more complicated concept for computing payments to participants. A numerical study investigates how frequently desired properties are violated. We show that both mechanisms can be acceptable in practical situations, but none of them can satisfy all desired properties.