Supply-limiting mechanisms
Proceedings of the 13th ACM conference on electronic commerce, 2012•dl.acm.org
Most results in revenue-maximizing auction design hinge on" getting the price right"---
offering goods to bidders at a price low enough to encourage a sale, but high enough to
garner non-trivial revenue. Getting the price right can be hard work, especially when the
seller has little or no a priori information about bidders' valuations. A simple alternative
approach is to" let the market do the work", and have prices emerge from competition for
scarce goods. The simplest-imaginable implementation of this idea is the following: first, if …
offering goods to bidders at a price low enough to encourage a sale, but high enough to
garner non-trivial revenue. Getting the price right can be hard work, especially when the
seller has little or no a priori information about bidders' valuations. A simple alternative
approach is to" let the market do the work", and have prices emerge from competition for
scarce goods. The simplest-imaginable implementation of this idea is the following: first, if …
Most results in revenue-maximizing auction design hinge on "getting the price right" --- offering goods to bidders at a price low enough to encourage a sale, but high enough to garner non-trivial revenue. Getting the price right can be hard work, especially when the seller has little or no a priori information about bidders' valuations.
A simple alternative approach is to "let the market do the work", and have prices emerge from competition for scarce goods. The simplest-imaginable implementation of this idea is the following: first, if necessary, impose an artificial limit on the number of goods that can be sold; second, run the welfare-maximizing VCG mechanism subject to this limit.
We prove that such "supply-limiting mechanisms" achieve near-optimal expected revenue in a range of single- and multi-parameter Bayesian settings. Indeed, despite their simplicity, we prove that they essentially match the state-of-the-art in prior-independent mechanism design.
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