Impersonation Strategies in Auctions

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Abstract

A common approach to analyzing repeated auctions, such as sponsored search auctions, is to treat them as complete information games, because it is assumed that, over time, players learn each other’s types. This overlooks the possibility that players may impersonate another type. Many standard auctions (including generalized second price auctions and core-selecting auctions), as well as the Kelly mechanism, have profitable impersonations. We define a notion of impersonation-proofness for the auction mechanism coupled with a process by which players learn about each other’s type, and show an equivalence to a problem of dominant-strategy mechanism design.