Cryptographic methods ensure truthful auctions despite abort risks
Credible AUctions via MPC Gadgets: Bounding Information Leakage Under Abort
Computer Science and Game TheoryCryptography and Security
Summary
Traditional online auctions can be manipulated by the auctioneer, who might quit the process if the outcome is bad for them. The authors show that using secure computation only for deciding who wins, but not how much to pay, limits what information can be leaked if the auctioneer aborts. They combine this with penalties for aborting and revealing bids one step at a time to create an auction that is both truthful and discourages quitting early. Their method guarantees the auctioneer gains no advantage by deviating, under realistic conditions.
What this means in practice
- •For online auction platforms: Enable auctions that prevent auctioneers from manipulating or aborting to gain an unfair advantage, protecting bidders and revenue.$Commercial implications: This approach enables building credible, secure auction systems that can be sold to marketplaces as fair and reliable platforms.
- •For financial exchange operators: Design trading mechanisms that limit information leakage and abort exploitation to ensure fair market outcomes under uncertainty.
Authors
Matheus Venturyne Xavier Ferreira
Abstract
The design of credible auctions---mechanisms where a revenue-maximizing auctioneer has no incentive to deviate from the protocol---faces a fundamental cryptographic barrier when the auctioneer controls shill bidders. While a natural approach is to use Secure Multi-Party Computation (MPC) to remove the trusted auctioneer, the impossibility of fair coin flipping of Cleve (1986) implies that monolithic MPC protocols grant the auctioneer a "free option": they can learn the auction's outcome and unilaterally abort if the revenue is unsatisfactory. Cryptographic commitments with ex-ante penalties mitigate this abort asymmetry, but no finite penalty suffices for heavy-tailed distributions. We circumvent this barrier by introducing the MPC Decomposition Principle. Rather than encrypting the entire mechanism, we use MPC strictly as an information-restriction tool. We isolate the winner determination problem into a minimal MPC gadget that computes and reveals the winner's identity but no payment information. This qualitative restriction mathematically bounds the information leaked upon an abort. By combining this gadget with sequential revelation and finite economic penalties, we design the Sequential Revelation Auction (SRA). We prove that bounding the information leakage strictly bounds the value of the free option, showing that a penalty of $k \geq \sum_{i=1}^n Rev(F_i)$ is sufficient for credibility, and tight: for equal-revenue distributions, every smaller penalty admits a profitable deviation. Using constant-round MPC, the SRA resolves an open question of Akbarpour and Li (2020) and Ferreira and Weinberg (2020) by providing a constant-round, incentive-compatible, revenue-optimal credible auction for all product distributions with vanishing revenue tails