Cryptographic Protocols for Secure Second-Price Auctions

In recent years auctions have become more and more important in the field of multiagent systems as useful mechanisms for resource allocation, task assignment and last but not least electronic commerce. In many cases the Vickrey (second-price sealed-bid) auction is used as a protocol that prescribes how the individual agents have to interact in order to come to an agreement. The main reasons for choosing the Vickrey auction are the existence of a dominant strategy equilibrium, the low bandwidth and time consumption due to just one round of bidding and the (theoretical) privacy of bids. This paper specifies properties that are needed to ensure the accurate and secret execution of Vickrey auctions and provides a classification of different forms of collusion. We approach the two major security concerns of the Vickrey auction: the vulnerability to a lying auctioneer and the reluctance of bidders to reveal their private valuations. We then propose a novel technique that allows to securely perform second-price auctions. This is achieved using the announcement of encrypted binary bidding lists on a blackboard. Top-down, bottom-up and binary search techniques are used to interactively find the second highest bid step by step without revealing unnecessary information.