Vickrey Auctions for Irregular Distributions (1306.4022v2)

Abstract: The classic result of Bulow and Klemperer \cite{BK96} says that in a single-item auction recruiting one more bidder and running the Vickrey auction achieves a higher revenue than the optimal auction's revenue on the original set of bidders, when values are drawn i.i.d. from a regular distribution. We give a version of Bulow and Klemperer's result in settings where bidders' values are drawn from non-i.i.d. irregular distributions. We do this by modeling irregular distributions as some convex combination of regular distributions. The regular distributions that constitute the irregular distribution correspond to different population groups in the bidder population. Drawing a bidder from this collection of population groups is equivalent to drawing from some convex combination of these regular distributions. We show that recruiting one extra bidder from each underlying population group and running the Vickrey auction gives at least half of the optimal auction's revenue on the original set of bidders.