The Devastating Effect of Information Brokers in Multi-Agent Systems

Abstract: In many multi-agent systems we find information brokers – agents that can disambiguate noisy signals upon payment of a fee (e.g., Carfax that provides reports on car histories, credit report companies, experts that provide accurate estimates on auctioned items). In this talk I will show that better information can hurt: the presence of the expert, even if the use of her services is optional, can degrade both individual agents’ utilities and overall social welfare.
The talk will focus on information brokers in two specific domains: auctions (where the provided information relates to the common value of the auctioned item) and distributed agent matching. For the first, I’ll show that with the existence of the information provider, in conflict with classic auction theory, the auctioneer will not necessarily find it beneficial to have more bidders participate in the auction and similarly bidders will not necessarily prefer less competition. Also, bidders’ unawareness of the auctioneer’s option to purchase the information does not necessarily play into the hands of the auctioneer and, similarly, bidders may sometimes benefit from not knowing that the auctioneer has the option to purchase such information. For the distributed matching application I’ll show that the externality imposed by the fact that others are consulting the expert can lead to a situation where the equilibrium outcome is that everyone consults the expert, even though all agents would be better off if the expert were not present. In both cases the agents may find it beneficial to pay the information-provider in order to leave the market (or alternatively publicly increase the price of the information she offers).