Heavy Tails Make Happy Buyers

02/20/2020

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by   Eric Bax, et al.

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In a second-price auction with i.i.d. (independent identically distributed) bidder valuations, adding bidders increases expected buyer surplus if the distribution of valuations has a sufficiently heavy right tail. While this does not imply that a bidder in an auction should prefer for more bidders to join the auction, it does imply that a bidder should prefer it in exchange for the bidder being allowed to participate in more auctions. Also, for a heavy-tailed valuation distribution, marginal expected seller revenue per added bidder remains strong even when there are already many bidders.