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A Budget-Balanced, Incentive-Compatible Scheme for Social Choice

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Agent-Mediated Electronic Commerce VI. Theories for and Engineering of Distributed Mechanisms and Systems (AMEC 2004)

Part of the book series: Lecture Notes in Computer Science ((LNAI,volume 3435))

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Abstract

Many practical scenarios involve solving a social choice problem: a group of self-interested agents have to agree on an outcome that best fits their combined preferences. We assume that each outcome presents a certain utility to an agent and that the best outcome is the one that maximizes the sum of these utilities. We call a mechanism for solving social choice problems incentive-compatible if for each agent, the behavior that maximizes its own utility is also the one that maximizes the group’s utility.

One way to achieve incentive-compatibility is the Vickrey-Clarke-Groves (VCG) tax ([5]) mechanism. However, it produces a surplus of taxes that cannot be redistributed to the agents and can severely reduce agents’ utilities. Game theory has shown that it is not possible to have a general scheme that is incentive-compatible, budget-balanced and guarantees a Pareto-efficient solution.

We present a scheme that sacrifices Pareto-efficiency to achieve budget balance while being both incentive-compatible and individually rational. On randomly generated social choice problems, the scheme results in significantly better overall agent utility than the VCG tax mechanism.

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Author information

Authors and Affiliations

  1. Artificial Intelligence Laboratory (LIA), Swiss Federal Institute of Technology (EPFL), IN-Ecublens, CH-1015, Ecublens, Switzerland

    Boi Faltings

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  1. Boi Faltings
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Editors and Affiliations

  1. Massachusetts Institute of Technology, Computer Science and Artificial Intelligence Laboratory, Massachusetts Avenue, 02139, Cambridge, USA

    Peyman Faratin

  2. IIIA, Artificial Intelligence Research Institute CSIC, Spanish Research Council, Campus, UAB, 08193, Bellaterra, Spain

    Juan A. Rodríguez-Aguilar

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© 2006 Springer-Verlag Berlin Heidelberg

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Faltings, B. (2006). A Budget-Balanced, Incentive-Compatible Scheme for Social Choice. In: Faratin, P., Rodríguez-Aguilar, J.A. (eds) Agent-Mediated Electronic Commerce VI. Theories for and Engineering of Distributed Mechanisms and Systems. AMEC 2004. Lecture Notes in Computer Science(), vol 3435. Springer, Berlin, Heidelberg. https://doi.org/10.1007/11575726_3

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  • DOI: https://doi.org/10.1007/11575726_3

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-29737-6

  • Online ISBN: 978-3-540-33166-7

  • eBook Packages: Computer ScienceComputer Science (R0)

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