  In a typical decentralized autonomous organization (DAO), people organize
themselves into a group that is programmatically managed. DAOs can act as
bidders in auctions, with a DAO's bid treated by the auctioneer as if it had
been submitted by an individual, without regard to the internal structure of
the DAO. We study auctions in which the bidders are DAOs. More precisely, we
consider the design of two-level auctions in which the "participants" are
groups of bidders rather than individuals. Bidders form DAOs to pool resources,
but must then also negotiate the terms by which the DAO's winnings are shared.
We model the outcome of a DAO's negotiations by an aggregation function (which
aggregates DAO members' bids into a single group bid), and a budget-balanced
cost-sharing mechanism (that determines DAO members' access to the DAO's
allocation and distributes the total payment demanded from the DAO to its
members). We pursue two-level mechanisms that are incentive-compatible (with
truthful bidding a dominant strategy for members of each DAO) and approximately
welfare-optimal. We prove that, even in the case of a single-item auction,
incentive-compatible welfare maximization is not possible: No matter what the
outer mechanism and the cost-sharing mechanisms used by DAOs, the welfare of
the resulting two-level mechanism can be a $\approx \ln n$ factor less than
optimal. We complement this lower bound with a natural two-level mechanism that
achieves a matching approximate welfare guarantee. Our upper bound also extends
to multi-item auctions where individuals have additive valuations. Finally, we
show that our positive results cannot be extended much further: Even in
multi-item settings with unit-demand bidders, truthful two-level mechanisms
form a highly restricted class and as a consequence cannot guarantee any
non-trivial approximation of the maximum social welfare.
