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Optimal auctions vs. anonymous pricing

Author

Listed:
  • Alaei, Saeed
  • Hartline, Jason
  • Niazadeh, Rad
  • Pountourakis, Emmanouil
  • Yuan, Yang

Abstract

For selling a single item to agents with independent but non-identically distributed values, the revenue optimal auction is complex. With respect to it, Hartline and Roughgarden (2009) showed that the approximation factor of the second-price auction with an anonymous reserve is between two and four. We consider the more demanding problem of approximating the revenue of the ex ante relaxation of the auction problem by posting an anonymous price and derive a formula for their worst-case ratio, denoted ρ, that numerically evaluates to e. As a corollary, the upper-bound of anonymous pricing or anonymous reserves versus the optimal auction improves from four to ρ≈e. We conclude that, up to the factor ρ, discrimination and simultaneity are unimportant for driving revenue in single-item auctions.

Suggested Citation

  • Alaei, Saeed & Hartline, Jason & Niazadeh, Rad & Pountourakis, Emmanouil & Yuan, Yang, 2019. "Optimal auctions vs. anonymous pricing," Games and Economic Behavior, Elsevier, vol. 118(C), pages 494-510.
    • Handle: RePEc:eee:gamebe:v:118:y:2019:i:c:p:494-510
    DOI: 10.1016/j.geb.2018.08.003
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    References listed on IDEAS

    as
    1. Devanur, Nikhil R. & Hartline, Jason D. & Yan, Qiqi, 2015. "Envy freedom and prior-free mechanism design," Journal of Economic Theory, Elsevier, vol. 156(C), pages 103-143.
    2. Shuchi Chawla & Jason Hartline & David Malec & Balasubramanian Sivan, 2010. "Sequential Posted Pricing and Multi-parameter Mechanism Design," Discussion Papers 1486, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Jason D. Hartline, 2012. "Approximation in Mechanism Design," American Economic Review, American Economic Association, vol. 102(3), pages 330-336, May.
    4. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Cited by:

    1. Bergemann, Dirk & Castro, Francisco & Weintraub, Gabriel, 2022. "Third-degree price discrimination versus uniform pricing," Games and Economic Behavior, Elsevier, vol. 131(C), pages 275-291.
    2. Rad Niazadeh & Negin Golrezaei & Joshua Wang & Fransisca Susan & Ashwinkumar Badanidiyuru, 2023. "Online Learning via Offline Greedy Algorithms: Applications in Market Design and Optimization," Management Science, INFORMS, vol. 69(7), pages 3797-3817, July.
    3. Adam N. Elmachtoub & Michael L. Hamilton, 2021. "The Power of Opaque Products in Pricing," Management Science, INFORMS, vol. 67(8), pages 4686-4702, August.
    4. Saeed Alaei & Ali Makhdoumi & Azarakhsh Malekian & Rad Niazadeh, 2022. "Descending Price Auctions with Bounded Number of Price Levels and Batched Prophet Inequality," Papers 2203.01384, arXiv.org.

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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