Reducing Interaction Cost: A Mechanism Deisgn Approach
Abstract
In this thesis we study the problem of requiring self-interested
agents need
to interact with some centralized mechanism where
this interaction is costly. To improve their utility, agents may choose to interact
with \emph{neighbours} in order to coordinate their actions,
potentially resulting in savings with respect to total interaction
costs for all involved. We highlight the issues that arise in such
a setting for the mechanism as well as for the agents.
We use a mechanism-design approach to study this problem and present
a model for self-interested agents to form groups with neighbours in order to
reduce the total interaction cost. Our model focuses on two
aspects: reward-distribution and cost-sharing. We look at two
scenarios for reward-distribution mechanisms and proposed a
core-stable payoff as well as a fair payoff mechanism.
We then propose a cost-sharing mechanism that agents can use to coordinate and reduce
their interaction costs. We prove this mechanism to be incentive-compatible,
cost-recovery and fair. We also discuss how agents might form groups in order to save on cost.
We study how our final outcome (the total percentage of savings as a group) depends on the agents' interaction topology and
analyze different topologies. In addition we carry out experiments
which further validate our proposal.
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Cite this version of the work
Zhang Yunqi
(2007).
Reducing Interaction Cost: A Mechanism Deisgn Approach. UWSpace.
http://hdl.handle.net/10012/3205
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