Approximately optimal auctions for correlated bidders

Shahar Dobzinski, Hu Fu and Robert Kleinberg

Games and Economic Behavior, 2015, vol. 92, issue C, 349-369

Abstract: We consider the design of dominant strategy incentive compatible, revenue-maximizing auctions for an indivisible good, when bidders' values are drawn from a correlated distribution. For independent distributions, Myerson showed that the optimal auction for risk-neutral bidders remains incentive compatible regardless of bidders' risk attitudes. We show that, for correlated distributions, the same is true when only two bidders are involved, whereas for more bidders, randomization can generate strictly more revenue. However, for risk-neutral bidders, we show this gain is never more than a 53-factor.

Keywords: Bayesian mechanism design; Approximation Algorithms (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:92:y:2015:i:c:p:349-369

DOI: 10.1016/j.geb.2013.03.010

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