Glossary

Key terms used throughout the Daemon vault.

VCG Mechanism

Vickrey-Clarke-Groves mechanism. A family of truthful mechanisms where agents report valuations, the mechanism selects the socially optimal outcome, and each agent’s payment is based on the externality they impose on others. Named for William Vickrey, Edward Clarke, and Theodore Groves.

Dominant Strategy

A strategy that is optimal for a player regardless of what other players do. In VCG, truthful reporting is a dominant strategy — you can’t do better by lying, no matter what others bid.

Reverse Auction

An auction where sellers (suppliers) compete by bidding costs, and the lowest bidder wins. Daemon uses a reverse auction because members are supplying labor, not purchasing goods.

Vickrey Price

The amount credited to the winning bidder, based on the next-best bid rather than their own. In Daemon, this is measured in hours, not dollars.

Externality

The cost or benefit imposed on others by one agent’s participation. In VCG, you “pay” your externality — the difference in welfare for everyone else between worlds where you exist and don’t exist.

Truthfulness (Incentive Compatibility)

A mechanism is truthful if every participant’s best strategy is to report honestly. VCG achieves this because your payment doesn’t depend on your own report.

PVCG (Procurement-VCG)

An extension of VCG for reverse auction settings where suppliers have capacity limits. Relevant to Daemon because members have a 32-40 hour capacity constraint.

The 32-40 Band

Daemon’s work allocation range. Every member is guaranteed at least 32 hours/week (floor) and cannot be assigned more than 40 hours/week (ceiling). See: The 32-40 Band

Floor (32 hours)

The cooperative’s promise: every member gets enough credited work to qualify as full-time for benefits. The mechanism must satisfy this constraint.

Ceiling (40 hours)

The maximum credited hours per member per week. Prevents the mechanism from overloading efficient workers.

Bid

A member’s honest estimate of how many hours a project would take them personally.

Credited Hours

The Vickrey price assigned to the winning bidder. This is what counts toward the 32-40 band, regardless of actual time spent.