Diffusion Mechanism Design in Tree-Structured Social Network

Abstract

We design a fixed-price auction mechanism for a seller to sell multiple items in a tree-structured market. The buyers have independently drawn valuation from a uniform distribution, and the seller would like to incentivize buyers to invite more people to the auction. We prove that our mechanism is individual rational, and incentivize compatible with regard to the buyers' action. Furthermore, we show the approximation ratio of our mechanism to the optimal fixed-price auction in two ways, theoretically and via Monte-Carlo simulation, and show a high practical ratio. Finally, we discuss several factors affecting the behavior of our mechanism and its feasibility in reality.