Truthful mechanism

In game theory, an asymmetric game where players have private information is said to be strategyproof (SP) if it is a weakly-dominant strategy for every player to reveal his/her private information, i.e you fare best or at least not worse by being truthful, regardless of what the others do.

SP is also called truthful or dominant-strategy-incentive-compatible (DSIC), to distinguish it from other kinds of incentive compatibility.

An SP game is not always immune to collusion, but its robust variants are; with group strategyproofness no group of people can collude to misreport their preferences in a way that makes every member better of, and with strong group strategyproofness no group of people can collude to misreport their preferences in a way that makes at least one member of the group better off without making any of the remaining members worse of.

Typical examples of SP mechanisms are majority voting between two alternatives, second-price auction and any VCG mechanism.

Typical examples of a mechanisms that are not SP are plurality voting between three or more alternatives, and first-price auction.

SP is also applicable in network routing. Consider a network as a graph where each edge (i.e. link) has an associated cost of transmission, privately known to the owner of the link. The owner of a link wishes to be compensated for relaying messages. As the sender of a message on the network, one wants to find the least cost path. There are efficient methods for doing so, even in large networks. However, there is one problem: the costs for each link are unknown. A naive approach would be to ask the owner of each link the cost, use these declared costs to find the least cost path, and pay all links on the path their declared costs. However, it can be shown that this payment scheme is not SP, that is, the owners of some links can benefit by lying about the cost. We may end up paying far more than the actual cost. It can be shown that given certain assumptions about the network and the players (owners of links), a variant of the VCG mechanism is SP.

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