algorithmic game theory and internet computing
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Nash Bargaining via Flexible Budget Markets. Algorithmic Game Theory and Internet Computing. Vijay V. Vazirani. The new platform for computing. Internet. Massive computational power available Sellers (programs) can negotiate with individual buyers!. Internet. - PowerPoint PPT PresentationTRANSCRIPT
Algorithmic Game Theoryand Internet Computing
Vijay V. Vazirani
Nash Bargaining via
Flexible Budget Markets
The new platform for computing
Internet
Massive computational power available
Sellers (programs) can negotiate with
individual buyers!
Internet
Massive computational power available
Sellers (programs) can negotiate with
individual buyers!
Back to bargaining!
Internet
Massive computational power available
Sellers (programs) can negotiate with
individual buyers!
Algorithmic Game Theory
Bargaining and Game Theory
Nash (1950): First formalization of bargaining.
von Neumann & Morgenstern (1947):
Theory of Games and Economic Behavior
Game Theory: Studies solution concepts for
negotiating in situations of conflict of interest.
Bargaining and Game Theory
Nash (1950): First formalization of bargaining.
von Neumann & Morgenstern (1947):
Theory of Games and Economic Behavior
Game Theory: Studies solution concepts for
negotiating in situations of conflict of interest.
Theory of Bargaining: Central!
Nash bargaining
Captures the main idea that both players
gain if they agree on a solution.
Else, they go back to status quo.
Example
Two players, 1 and 2, have vacation homes:
1: in the mountains
2: on the beach
Consider all possible ways of sharing.
Utilities derived jointly
1v
2v
S : convex + compact
feasible set
Disagreement point = status quo utilities
1v
2v
1c
2c
S
Disagreement point = 1 2( , )c c
Nash bargaining problem = (S, c)
1v
2v
1c
2c
S
Disagreement point = 1 2( , )c c
Nash bargaining
Q: Which solution is the “right” one?
Solution must satisfy 4 axioms:
Paretto optimality
Invariance under affine transforms
Symmetry
Independence of irrelevant alternatives
1v
2v
1c
2c
v
S
( , ),
& ( , )
v N S c
T S v T v N T c
1v
2v
1c
2c
v
S
T
( , ),
& ( , )
v N S c
T S v T v N T c
Thm: Unique solution satisfying 4 axioms
1 2( , ) 1 1 2 2( , ) max {( )( )}v v SN S c v c v c
1v
2v
1c
2c
S
Generalizes to n-players
Theorem: Unique solution
1 1( , ) max {( ) ... ( )}v S n nN S c v c v c
Generalizes to n-players
Theorem: Unique solution
1 1( , ) max {( ) ... ( )}v S n nN S c v c v c
(S, c) is feasible if S contains a point that makes each i strictly happier than ci
Bargaining theory studies promise problem
Restrict to instances (S, c) which are feasible.
Linear Nash Bargaining (LNB)
Feasible set is a polytope defined by
linear packing constraints
Nash bargaining solution is
optimal solution to convex program:
max log( )
. .
i ii
v c
s t
packing constraints
Q: Compute solution combinatoriallyin polynomial time?
Study promise problem?
Decision problem reduces to promise problem
Therefore, study decision and search problems.
Linear utilities
B: n players with disagreement points, ci
G: g goods, unit amount each
S = utility vectors obtained by distributing
goods among players
0i ij ij ijj G
v u x x
e.g., ci = i’s utility for initial endowment
B: n players with disagreement points, ci
G: g goods, unit amount each
S = utility vectors obtained by distributing
goods among players
0i ij ij ijj G
v u x x
Convex program giving NB solution
max log( )
. .
:
: 1
: 0
i ii
i ij ijj
iji
ij
v c
s t
i v
j
ij
u xx
x
Theorem
If instance is feasible,
Nash bargaining solution is rational! Polynomially many bits in size of instance
Theorem
If instance is feasible,
Nash bargaining solution is rational! Polynomially many bits in size of instance
Decision and search problems
can be solved in polynomial time.
Resource Allocation Nash Bargaining Problems
Players use “goods” to build “objects”
Player’s utility = number of objects
Bound on amount of goods available
2s
1s
2t
1t
( )cap e
Goods = edges Objects = flow paths
2s
1s
2t
1t
( )cap e
Given disagreement point, find NB soln.
Theorem:
Strongly polynomial, combinatorial algorithm
for single-source multiple-sink case.Solution is again rational.
Insights into game-theoretic properties of Nash bargaining problems
Chakrabarty, Goel, V. , Wang & Yu:
Efficiency (Price of bargaining)Fairness Full competitiveness
Linear utilities
B: n players with disagreement points, ci
G: g goods, unit amount each
S = utility vectors obtained by distributing
goods among players
0i ij ij ijj G
v u x x
Game plan
Use KKT conditions to
transform Nash bargaining problem to
computing the equilibrium in a certain market.
Find equilibrium using primal-dual paradigm.
Game plan
Use KKT conditions to
transform Nash bargaining problem to
computing the equilibrium in a certain market.
Find equilibrium using primal-dual paradigm.
Crown jewel of mathematicaleconomics for over a century!
General Equilibrium Theory
A central tenet
Prices are such that demand equals supply, i.e.,
equilibrium prices.
A central tenet
Prices are such that demand equals supply, i.e.,
equilibrium prices.
Easy if only one good
Supply-demand curves
Irving Fisher, 1891
Defined a fundamental
market model
Fisher’s Model
B = n buyers, money mi for buyer i
G = g goods, w.l.o.g. unit amount of each good : utility derived by i
on obtaining one unit of j Total utility of i,
i ij ijj
U u xiju
[0,1]
i ij ijj
ij
v u xx
Fisher’s Model
B = n buyers, money mi for buyer i
G = g goods, w.l.o.g. unit amount of each good : utility derived by i
on obtaining one unit of j Total utility of i,
Find market clearing prices.
i ij ijj
U u xiju
[0,1]
i ij ijj
ij
v u xx
An almost entirely non-algorithmic theory!
General Equilibrium Theory
Flexible budget market,only difference:
Buyers don’t spend a fixed amount of money.
Instead, they know how much utility they desire.
At any given prices, they spend just enough
money to accrue utility desired.
Most cost-effective goods
At prices p, for buyer i: Si =
Define
arg min jj
ij
p
u
( ) min jj
ij
pcost i
u
Flexible budget market
Agent i wants utility
At prices p, must spend to get utility
ic
ic. ( )ic cost i
Flexible budget market
Agent i wants utility
At prices p, must spend to get utility
Define
Find market clearing prices.
ic
ic
1 . ( )i im c cost i
. ( )ic cost i
Flexible budget market
Agent i wants utility
At prices p, must spend to get utility
Define
Find market clearing prices -- may not exist!!
ic
ic
1 . ( )i im c cost i
. ( )ic cost i
Flexible budget market
Agent i wants utility
At prices p, must spend to get utility
Define
Find market clearing prices -- may not exist!!
feasible/infeasible
ic
ic
1 . ( )i im c cost i
. ( )ic cost i
Theorem: Nash Bargaining for linear utilities
reduces to
Equilibrium for flexible budget markets
Theorem: Nash Bargaining for linear utilitiesreduces to
Equilibrium for flexible budget markets
(S(u), c) M(u, c)
(S, c) is feasible iff M is feasible.
If feasible, x is Nash bargaining solution iff x is equilibrium allocation.
Primal-Dual Paradigm
Usual framework: LP-duality theory
Primal-Dual Paradigm
Usual framework: LP-duality theory
Extension to convex programs and
KKT conditions.
Yin & Yang
Combinatorial Algorithm for Linear Case of Fisher’s Model
Devanur, Papadimitriou, Saberi & V., 2002
Using primal-dual paradigm
Combinatorial Algorithm for Linear Case of Fisher’s Model
Devanur, Papadimitriou, Saberi & V., 2002
Using primal-dual paradigm
Solves Eisenberg-Gale convex program
Eisenberg-Gale Program, 1959
max log
. .
:
: 1
: 0
i ii
i ij ijj
iji
ij
m v
s t
i v
j
ij
u xx
x
Eisenberg-Gale Program, 1959
max log
. .
:
: 1
: 0
i ii
i ij ijj
iji
ij
m v
s t
i v
j
ij
u xx
x
prices pj
Why remarkable?
Equilibrium simultaneously optimizes
for all agents.
How is this done via a single objective function?
Idea of algorithm
primal variables: allocations dual variables: prices of goods iterations:
execute primal & dual improvements
Allocations Prices (Money)
Flexible budget market
Main differences:
mi ’s change as prices change.
problem is not total.
Allocations Prices (Money)
Allocations Prices (Money)
?
InfeasibleFeasible
Decision
Search
An easier question
Given prices p, are they equilibrium prices?
If so, find equilibrium allocations.
An easier question
Given prices p, are they equilibrium prices?
If so, find equilibrium allocations.
For each i, 1 . ( )i im c cost i
m(1)
m(2)
m(3)
m(4)
p(1)
p(2)
p(3)
p(4)
For each i, most cost-effective goods
arg min ji j
ij
pS
u
Network N(p)
m(1)
m(2)
m(3)
m(4)
p(1)
p(2)
p(3)
p(4)
infinite capacities
Max flow in N(p)
m(1)
m(2)
m(3)
m(4)
p(1)
p(2)
p(3)
p(4)
p: equilibrium prices iff both cuts saturated
Two important considerations
The price of a good never exceeds
its equilibrium priceInvariant: s is a min-cut
Max flow
m(1)
m(2)
m(3)
m(4)
p(1)
p(2)
p(3)
p(4)
p: low prices
Two important considerations
The price of a good never exceeds
its equilibrium priceInvariant: s is a min-cut
Rapid progress is madeBalanced flows
Max-flow in N
m p
W.r.t. max-flow f, surplus(i) = m(i) – f(i,t)
i
Balanced flow
surplus vector: vector of surpluses w.r.t. f.
A max-flow that
minimizes l2 norm of surplus vector.
Allocations Prices (Money)
Allocations Prices (Money)
?
InfeasibleFeasible
Decision
Search
Balanced flow helps Decision as well!
Proof of infeasibility: dual solution to
max
. .
:
: 1
, : 0
ij ij ij G
iji B
ij
t
s t
i u x c t
j x
i j x
Theorem: Algorithm runs in polynomial time.
Theorem: Algorithm runs in polynomial time.
Q: Find strongly polynomial algorithm!
Nonlinear programs with rational solutions!
Open
Nonlinear programs with rational solutions!
Solvable combinatorially!!
Open
Primal-Dual Paradigm
Combinatorial Optimization (1960’s & 70’s):
Integral optimal solutions to LP’s
Primal-Dual Paradigm
Combinatorial Optimization (1960’s & 70’s):
Integral optimal solutions to LP’s
Approximation Algorithms (1990’s):
Near-optimal integral solutions to LP’s
Primal-Dual Paradigm
Combinatorial Optimization (1960’s & 70’s):
Integral optimal solutions to LP’s
Approximation Algorithms (1990’s):
Near-optimal integral solutions to LP’s
Algorithmic Game Theory (New Millennium):
Rational solutions to nonlinear convex programs
Primal-Dual Paradigm
Combinatorial Optimization (1960’s & 70’s):
Integral optimal solutions to LP’s
Approximation Algorithms (1990’s):
Near-optimal integral solutions to LP’s
Algorithmic Game Theory (New Millennium):
Rational solutions to nonlinear convex programs
Primal-Dual Paradigm
Combinatorial Optimization (1960’s & 70’s):
Integral optimal solutions to LP’s
Approximation Algorithms (1990’s):
Near-optimal integral solutions to LP’s
Algorithmic Game Theory (New Millennium):
Rational solutions to nonlinear convex programs
Approximation algorithms for convex programs?!
Open
Can Nash bargaining problem
for linear utilities case
be captured via an LP?