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99% Revenue via Enhanced Competition

by   Michal Feldman, et al.
Tel Aviv University
Harvard University

A sequence of recent studies show that even in the simple setting of a single seller and a single buyer with additive, independent valuations over m items, the revenue-maximizing mechanism is prohibitively complex. This problem has been addressed using two main approaches: (i) Approximation: the best of two simple mechanisms (sell each item separately, or sell all the items as one bundle) gives 1/6 of the optimal revenue [BILW14]. (ii) Enhanced competition: running the simple VCG mechanism with additional m buyers extracts at least the optimal revenue in the original market [EFFTW17]. Both approaches, however, suffer from severe drawbacks: On the one hand, losing 83% of the revenue is hardly acceptable in any application. On the other hand, attracting a linear number of new buyers may be prohibitive. Our main result is that by combining the two approaches one can achieve the best of both worlds. Specifically, for any constant ϵ one can obtain a (1-ϵ) fraction of the optimal revenue by running simple mechanisms --- either selling each item separately or selling all items as a single bundle --- with substantially fewer additional buyers: logarithmic, constant, or even none in some cases.


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