Distributed algorithmic mechanism design (DAMD) is an extension of algorithmic mechanism design.
DAMD differs from Algorithmic mechanism design since the algorithm is computed in a distributed manner rather than by a central authority. This greatly improves computation time since the burden is shared by all agents within a network.
One major obstacle in DAMD is ensuring that agents reveal the true costs or preferences related to a given scenario. Often these agents would rather lie in order to improve their own utility. DAMD is full of new challenges since one can no longer assume an obedient networking and mechanism infrastructure where rational players control the message paths and mechanism computation.
Game theory and distributed computing both deal with a system with many agents, in which the agents may possibly pursue different goals. However they have different focuses. For instance one of the concerns of distributed computing is to prove the correctness of algorithms that tolerate faulty agents and agents performing actions concurrently. On the other hand, in game theory the focus is on devising a strategy which leads us to an equilibrium in the system. [1]
Nash equilibrium is the most commonly-used notion of equilibrium in game theory. However Nash equilibrium does not deal with faulty or unexpected behavior. A protocol that reaches Nash equilibrium is guaranteed to execute correctly in the face of rational agents, with no agent being able to improve its utility by deviating from the protocol. [2]
There is no trusted center as there is in AMD. Thus, mechanisms must be implemented by the agents themselves. The solution preference assumption requires that each agent prefers any outcome to no outcome at all: thus, agents have no incentive to disagree on an outcome or cause the algorithm to fail. In other words, as Afek et al. said, "agents cannot gain if the algorithm fails". [3] As a result, though agents have preferences, they have no incentive to fail the algorithm.
A mechanism is considered to be truthful if the agents gain nothing by lying about their or other agents' values. A good example would be a leader election algorithm that selects a computation server within a network. The algorithm specifies that agents should send their total computational power to each other, after which the most powerful agent is chosen as the leader to complete the task. In this algorithm agents may lie about their true computation power because they are potentially in danger of being tasked with CPU-intensive jobs which will reduce their power to complete local jobs. This can be overcome with the help of truthful mechanisms which, without any a priori knowledge of the existing data and inputs of each agent, cause each agent to respond truthfully to requests. [4]
A well-known truthful mechanism in game theory is the Vickrey auction.
Leader election is a fundamental problem in distributed computing and there are numerous protocols to solve this problem. System agents are assumed to be rational, and therefore prefer having a leader to not having one. The agents may also have different preferences regarding who becomes the leader (an agent may prefer that he himself becomes the leader). Standard protocols may choose leaders based on the lowest or highest ID of system agents. However, since agents have an incentive to lie about their ID in order to improve their utility such protocols are rendered useless in the setting of algorithmic mechanism design.
A protocol for leader election in the presence of rational agents has been introduced by Ittai et al.:
This protocol correctly elects a leader while reaching equilibrium and is truthful since no agent can benefit by lying about its input. [5]
Mechanism design is a field in economics and game theory that takes an objectives-first approach to designing economic mechanisms or incentives, toward desired objectives, in strategic settings, where players act rationally. Because it starts at the end of the game, then goes backwards, it is also called reverse game theory. It has broad applications, from economics and politics in such fields as market design, auction theory and social choice theory to networked-systems.
In game theory, an asymmetric game where players have private information is said to be strategy-proof or strategyproof (SP) if it is a weakly-dominant strategy for every player to reveal his/her private information, i.e. given no information about what the others do, you fare best or at least not worse by being truthful.
A Vickrey auction or sealed-bid second-price auction (SBSPA) is a type of sealed-bid auction. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price paid is the second-highest bid. This type of auction is strategically similar to an English auction and gives bidders an incentive to bid their true value. The auction was first described academically by Columbia University professor William Vickrey in 1961 though it had been used by stamp collectors since 1893. In 1797 Johann Wolfgang von Goethe sold a manuscript using a sealed-bid, second-price auction.
A double auction is a process of buying and selling goods with multiple sellers and multiple buyers. Potential buyers submit their bids and potential sellers submit their ask prices to the market institution, and then the market institution chooses some price p that clears the market: all the sellers who asked less than p sell and all buyers who bid more than p buy at this price p. Buyers and sellers that bid or ask for exactly p are also included. A common example of a double auction is stock exchange.
A mechanism is called incentive-compatible (IC) if every participant can achieve the best outcome to themselves just by acting according to their true preferences.
A fundamental problem in distributed computing and multi-agent systems is to achieve overall system reliability in the presence of a number of faulty processes. This often requires coordinating processes to reach consensus, or agree on some data value that is needed during computation. Example applications of consensus include agreeing on what transactions to commit to a database in which order, state machine replication, and atomic broadcasts. Real-world applications often requiring consensus include cloud computing, clock synchronization, PageRank, opinion formation, smart power grids, state estimation, control of UAVs, load balancing, blockchain, and others.
The revelation principle is a fundamental principle in mechanism design. It states that if a social choice function can be implemented by an arbitrary mechanism, then the same function can be implemented by an incentive-compatible-direct-mechanism with the same equilibrium outcome (payoffs).
Implementation theory is an area of research in game theory concerned with whether a class of mechanisms can be designed whose equilibrium outcomes implement a given set of normative goals or welfare criteria.
Algorithmic mechanism design (AMD) lies at the intersection of economic game theory, optimization, and computer science. The prototypical problem in mechanism design is to design a system for multiple self-interested participants, such that the participants' self-interested actions at equilibrium lead to good system performance. Typical objectives studied include revenue maximization and social welfare maximization. Algorithmic mechanism design differs from classical economic mechanism design in several respects. It typically employs the analytic tools of theoretical computer science, such as worst case analysis and approximation ratios, in contrast to classical mechanism design in economics which often makes distributional assumptions about the agents. It also considers computational constraints to be of central importance: mechanisms that cannot be efficiently implemented in polynomial time are not considered to be viable solutions to a mechanism design problem. This often, for example, rules out the classic economic mechanism, the Vickrey–Clarke–Groves auction.
Algorithmic game theory (AGT) is an area in the intersection of game theory and computer science, with the objective of understanding and design of algorithms in strategic environments.
Market design is a practical methodology for creation of markets of certain properties, which is partially based on mechanism design. In some markets, prices may be used to induce the desired outcomes — these markets are the study of auction theory. In other markets, prices may not be used — these markets are the study of matching theory.
In mechanism design, a Vickrey–Clarke–Groves (VCG) mechanism is a generic truthful mechanism for achieving a socially-optimal solution. It is a generalization of a Vickrey–Clarke–Groves auction. A VCG auction performs a specific task: dividing items among people. A VCG mechanism is more general: it can be used to select any outcome out of a set of possible outcomes.
A Bayesian-optimal mechanism (BOM) is a mechanism in which the designer does not know the valuations of the agents for whom the mechanism is designed, but the designer knows that they are random variables and knows the probability distribution of these variables.
The Price of Anarchy (PoA) is a concept in game theory and mechanism design that measures how the social welfare of a system degrades due to selfish behavior of its agents. It has been studied extensively in various contexts, particularly in auctions.
Boi Volkert Faltings is a Swiss professor of artificial intelligence at École Polytechnique Fédérale de Lausanne.
In game theory, asynchrony occurs when gameplay does not proceed in consistently paced rounds. A system is synchronous if agents in a game move in lockstep according to a global timing system, whereas "in an asynchronous system, there is no global clock. The agents in the system can run at arbitrary rates relative to each other."
Strategic fair division is the branch of fair division in which the participants are assumed to hide their preferences and act strategically in order to maximize their own utility, rather than playing sincerely according to their true preferences.
Truthful cake-cutting is the study of algorithms for fair cake-cutting that are also truthful mechanisms, i.e., they incentivize the participants to reveal their true valuations to the various parts of the cake.
Truthful resource allocation is the problem of allocating resources among agents with different valuations over the resources, such that agents are incentivized to reveal their true valuations over the resources.
In mechanism design, a branch of economics, a weakly-budget-balanced (WBB) mechanism is a mechanism in which the total payment made by the participants is at least 0. This means that the mechanism operator does not incur a deficit, i.e., does not have to subsidize the market. Weak budget balance is considered a necessary requirement for the economic feasibility of a mechanism. A strongly-budget-balanced (SBB) mechanism is a mechanism in which the total payment made by the participants is exactly 0. This means that all payments are made among the participants - the mechanism has neither a deficit nor a surplus. The term budget-balanced mechanism is sometimes used as a shorthand for WBB, and sometimes as a shorthand for SBB.