Stackelberg Attacks on Auctions and Blockchain Transaction Fee Mechanisms

Abstract

We study a multi-unit single-demand auction in a setting where agents can arbitrarily commit to strategies that may depend on the commitments of other agents. Such commitments non-trivially change the equilibria of the auction by inducing a metagame, in which agents commit to strategies. We demonstrate a strategy an attacker may commit to that ensures they receive one such item for free, while forcing the remaining agents to enter a lottery for the remaining items. The attack is detrimental to the auctioneer, who loses most of their revenue. We show that the strategy works as long as the agents have valuations that are somewhat concentrated. The attack is robust to a large fraction of the agents being either oblivious to the attack or having exceptionally high valuations. The attacker may coerce these agents into cooperating by promising them a free item. We show that the conditions for the attack to work hold with high probability when (1) the auction is not too congested, and (2) the valuations are sampled i.i.d. from either a uniform distribution or a Pareto distribution. The attack works for first-price auctions, second-price auctions, and the transaction fee mechanism EIP-1559 used by Ethereum.