Computer Science Department
School of Computer Science, Carnegie Mellon University


Mechanism Design via Machine Learning

Maria-Florina Balcan, Avrim Blum, Jason D. Hartline*, Yishay Mansour**

May 2005

Keywords: Mechanism Design, Machine Learning, Sample Complexity, Profit Maximization, Unlimited Supply, Digital Good Auction, Attribute Auctions, Combinatorial Auctions

We use techniques from sample-complexity in machine learning to reduce problems of incentive-compatible mechanism design to standard algorithmic questions, for a broad class of revenue-maximizing pricing problems. Our reductions imply that for these problems, given an optimal (or Β-approximation) algorithm for the standard algorithmic problem, we can convert it into a (1 + ε)-approximation (or Β(1 + ε)-approximation) for the incentive compatible mechanism design problem, so long as the number of bidders is sufficiently large as a function of an appropriate measure of complexity of the comparison class of solutions. We apply these results to the problem of auctioning a digital good, to the attribute auction problem which includes a wide variety of discriminatory pricing problems, and to the problem of item-pricing in unlimited-supply combinatorial auctions. From a machine learning perspective, these settings present several challenges: in particular, the loss function is discontinuous and asymmetric, and the range of bidders' valuations may be large.

33 pages

*Microsoft Research, Mountain View, CA
**School of Computer Science, Tel-Aviv University

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