Robustness in Mechanism Design

Abstract

The article reviews the robust design and analysis of auctions, focusing on the predominant paradigm in the computer science literature, which quantifies robustness by the worst-case, over environments, ratio between the robust auction's performance and that of an optimal auction for the environment. Applications include robust analysis of canonical auctions such as the first-price auction for the welfare objective, prior-robust auction design for the revenue objective, and prior-robust design of exchange mechanisms for the gains-from-trade objective. Finally, the revelation principle is not without loss in robust mechanism design. The potential loss can be quantified by the revelation gap, the fraction of the optimal robust guarantee that is lost when restricting from all mechanisms to revelation mechanisms.

This is a preprint of a review article that is accepted to appear in the Annual Review of Economics in August of 2027. It contains an additional section on the revelation gap that, for space reasons, was mostly removed from the published version