Referral incentive design: VCG mechanisms and multilevel mechanisms

Joosung Lee, Seungwon Jeong

Research output: Contribution to conferencePaperpeer-review

Abstract / Description of output

We introduce a core-selecting mechanism, the groupwise-pivotal referral (GPR) mechanism, for auctions with referrals where buyers can only participate through referrals. Each buyer's type consists of a valuation and referable buyers.
In auctions with referrals, the Vickrey-Clarke-Groves (VCG) mechanism provides referral incentives, as opposed to the second-price auction (SPA), but it is not budget-feasible. In contrast, GPR is core-selecting, which also implies efficiency and budget feasibility. In GPR, bidders refer truthfully and have no incentive to underbid; any bidder and his referred bidders cannot be better off by misreporting; and any bidder cannot be better off using shill bidding. Moreover, GPR outperforms both VCG and SPA in terms of ex-post revenue.
Original languageEnglish
Publication statusPublished - 23 Jun 2018
Event2018 Asian Meeting of the Econometric Society - Sogang University, Seoul, Korea, Republic of
Duration: 21 Jun 201823 Jun 2018


Conference2018 Asian Meeting of the Econometric Society
Abbreviated titleAMES
Country/TerritoryKorea, Republic of
Internet address

Keywords / Materials (for Non-textual outputs)

  • referral mechanism
  • mechanism design
  • budget feasibility
  • core selection


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