246 DSL Reasoning under Uncertainty
do not admit a stable Bayesian description. We show its usefulness in auctions. In the full version of
this paper, we also study its behavior in other prominent strategic settings, such as voting. In our main
result we consider the celebrated welfare maximizing VCG mechanism in combinatorial auctions setting,
where it is known to fail under false name (aka Sybil) attacks. We show that DSL agents lead to optimal
social welfare.
1.1 Reasoning under Uncertainty
A classic distinction [15] separates reasoning under risk, where the actors are rational and there is a
commonly known distribution about their environment (also known as the stochastic or Bayesian setting),
and reasoning under uncertainty, where the general structure of strategies and outcomes is known, but
there is no probabilistic information about the environment. Moreover, even assumptions regarding
actors’ rationality or behavior characteristics may not be guaranteed . For such cases, a robust or worst-
case approach seems appropriate, and various notions exist to capture it. Ideally, a dominant strategy
solution exists, but this is usually not the case (and indeed it is not the case in all the cases we analyze
in this paper). A minimal robust notion is that of a safety level strategy, which uses a max-min approach
over all possible outcomes given a strategy choice. However, though it yields interesting results in some
cases [2, 20], in many other cases it does not tell us much about what strategy to choose, in particular in
auctions settings, where we derive our most interesting results. As we see, this is because in auctions the
natural safety level is 0 (which happens when the bidder loses the auction), and any strategy that does
not overbid guarantees it. It is thus hard to choose among these strategies without considering a more
refined notion. Existing refined notions are the lexicographic max-min (originally defined in [19]) and
min-max regret [18]. We overview their comparison to the notion of DSL in Section 3 and Appendix A,
respectively.
1.2 VCG, Sybil Attacks, and Welfare
VCG is a well known mechanism which can be applied for combinatorial auctions. VCG has good
qualities such as being dominant strategy incentive compatible and achieving optimal social welfare.
However, under the possibility of false-name attacks [22], it is no longer truthful. Coming up with other
mechanisms does not solve the basic conundrum: In the full information settings, any false-name proof
mechanism performs poorly in terms of welfare [12].
A possible avenue to solving the issue is by limiting the discussed valuation classes. However, an
example in [13] shows that even when all bidders have sub-modular valuations, VCG is no longer dom-
inant strategy incentive-compatible under false-name attacks. Notably though, even with this example,
VCG still arrives at the socially optimal allocation, and in fact as [1] show, this observation is true in
general up to a constant with sub-modular (and near sub-modular) bidders. However, in the full version
of our paper, we show an example where for the XOS valuation class, which extends the sub-modular
class, there is such an attack so that VCG arrives at an arbitrarily sub-optimal allocation. The attack we
describe is enabled by the full information settings. Without full information, the attack is risky for the
attacker, since it could lead to negative utility, as the attacker overbids her true valuation.
A useful approach, that can lead to better welfare guarantees than dominant strategy mechanism
design, is Bayesian mechanism design. Assuming that the bidder distributions are common knowledge,
recent work has shown that selling each item separately leads to good constant approximation welfare
guarantees for XOS [4] and sub-additive [8] valuations. Though the works do not explicitly consider