Autocratic Mechanisms: A Form of Dictatorship in Constrained Combinatorial Auctions

We characterize the space of deterministic, dominant-strategy incentive compatible, individually rational, and Pareto-optimal combinatorial auctions where efficiency is not required. We examine a model with two players andknonidentical items (2koutcomes), multidimensional types, private values, non-negative prices, and quasilinear preferences for the players with one relaxation — the players are subject to publicly-known budget constraints. We show that if it is publicly known that the players value the bundles more than the smaller of their budgets then the studied space includes one type of mechanism: autocratic mechanisms (a form of dictatorship). Furthermore, we prove that there are families of autocratic mechanisms thatuniquelyfulfill the basic properties of deterministic, dominant-strategy incentive compatible, individually rational, and Pareto-optimal. Interestingly the above basic properties are a weaker requirement than it may initially appear, as the property of Pareto optimality in our model of budget-constrained players and non-negative prices do not coincide with welfare maximization, i.e., efficiency as such is a much weaker requirement.