Abstract
We introduce take-it-or-leave-it auctions (TLAs) as an allocation mechanism that allows buyers to retain much of their private valuation information as do the most common auction mechanisms (English and Dutch auctions), yet, unlike them, generates close-to-optimal expected utility for the seller. We show that if each buyer receives at most one offer, each buyer’s dominant strategy is to act truthfully. In more general TLAs, the buyers’ optimal strategies are more intricate, and we derive the perfect Bayesian equilibrium for the game. We develop algorithms for finding the equilibrium and also for optimizing the offers in both types of TLAs so as to maximize the seller’s expected utility. We prove that optimal TLAs have many desirable features. In several example settings we show that the seller’s expected utility already is close to optimal for a small number of offers. As the number of buyers increases, the seller’s expected utility increases, and becomes increasingly (but not monotonically) more competitive with Myerson’s expected utility maximizing auction. Myerson’s uses full valuation revelation and is arguably impractical because its rules are unintuitive, unlike ours.
This material is based upon work supported by the National Science Foundation under CAREER Award IRI-9703122, Grant IIS-9800994, ITR IIS-0081246, and ITR IIS-0121678.
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Sandholm, T., Gilpin, A. (2004). Sequences of Take-It-or-Leave-It Offers: Near-Optimal Auctions Without Full Valuation Revelation. In: Faratin, P., Parkes, D.C., Rodríguez-Aguilar, J.A., Walsh, W.E. (eds) Agent-Mediated Electronic Commerce V. Designing Mechanisms and Systems. AMEC 2003. Lecture Notes in Computer Science(), vol 3048. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-25947-3_5
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DOI: https://doi.org/10.1007/978-3-540-25947-3_5
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