A Unified Mechanism Design Framework for Networked Systems

Abstract: Mechanisms such as auctions and pricing schemes are utilized to design strategic (noncooperative) games for networked systems. Although the participating players are selfish, these mechanisms ensure that the game outcome is optimal with respect to a global criterion (e.g. maximizing a social welfare function), preference-compatible, and strategy-proof, i.e. players have no reason to deceive the designer. The mechanism designer achieves these objectives by introducing specific rules and incentives to the players; in this case by adding resource prices to their utilities. In auction-based mechanisms, the mechanism designer explicitly allocates the resources based on bids of the participants in addition to setting prices. Alternatively, pricing mechanisms enforce global objectives only by charging the players for the resources they have utilized. In either setting, the player preferences represented by utility functions may be coupled or decoupled, i.e. they depend on other player's actions or only on player's own actions, respectively. The unified framework and its information structures are illustrated through multiple example resource allocation problems from wireless and wired networks.