Derandomization of auctions
AbstractWe study the role of randomization in seller optimal (i.e., profit maximization) auctions. Bayesian optimal auctions (e.g., Myerson, 1981) assume that the valuations of the agents are random draws from a distribution and prior-free optimal auctions either are randomized (e.g., Goldberg et al., 2006) or assume the valuations are randomized (e.g., Segal, 2003). Is randomization fundamental to profit maximization in auctions? Our main result is a general approach to derandomize single-item multi-unit unit-demand auctions while approximately preserving their performance (i.e., revenue). Our general technique is constructive but not computationally tractable. We complement the general result with the explicit and computationally-simple derandomization of a particular auction. Our results are obtained through analogy to hat puzzles that are interesting in their own right.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 72 (2011)
Issue (Month): 1 (May)
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Web page: http://www.elsevier.com/locate/inca/622836
Auctions Randomization Prior-free Hat puzzles;
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- Ilya Segal, 2003. "Optimal Pricing Mechanisms with Unknown Demand," American Economic Review, American Economic Association, vol. 93(3), pages 509-529, June.
- HervÊ Moulin, 1999. "Incremental cost sharing: Characterization by coalition strategy-proofness," Social Choice and Welfare, Springer, vol. 16(2), pages 279-320.
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