An asynchronous and secure ascending peer-to-peer auction

Abstract

In recent years, auctions have become a very popular price discovery mechanism. Among them, second-price auctions are of theoretical importance, as they have the simple dominant strategy of bidding ones true valuation. Sellers, however, are reluctant to do so, as a malicious auctioneer could take advantage of this knowledge. Several distributed auction mechanisms have been suggested that make it possible to determine the auction outcome without revealing the winner's valuation of the good; however, they are only suitable for sealed-bid auction.This paper suggests a distributed mechanism for ascending second price auctions. The auction protocol has the ability to preserve the privacy of the winning bidder's true valuation or highest bid, respectively, with a high probability. The auction protocol is based on a high number of auctioneers that are distributed to several groups. A bidder generates an encrypted chain of monotonously increasing bidding steps, where each bidding step can be decrypted by a different auctioneer group reducing the possibilities of manipulation for malicious auctioneers. Another fundamental advantage of this secure approach is that bidders need not be online except for submitting their bid chain to the auctioneers. © 2005 ACM.