Robust Auctions for Revenue via Enhanced Competition

Abstract

In “Robust Auctions for Revenue via Enhanced Competition,” T. Roughgarden, I. Talgam-Cohen, and Q. Yan revisit the classic Bulow–Klemperer result. This result compares the revenues of two well-known auction formats: the welfare-maximizing Vickrey auction and the revenue-maximizing Myerson auction. It shows that, with an extra bidder competing for the item, the Vickrey auction becomes as good as the Myerson auction in terms of revenue while maintaining independence from prior distributional information about bidders’ valuations. Unfortunately, Myerson’s toolbox for revenue-optimal auction design does not extend to combinatorial auctions with multiple heterogenous items, for which optimizing revenue remains a challenge—especially if we want auction designs that are simple and robust enough to use in practice. This paper extends the Bulow–Klemperer result to multiple heterogenous items by showing that a prior-independent, simple, welfare-maximizing auction with additional competing bidders achieves as much revenue as the ill-understood optimal auction.