Bounding the Menu-Size of Approximately Optimal Auctions via Optimal-Transport Duality

Abstract: The question of the minimum menu-size for approximate (i.e., up-to-$\varepsilon$) Bayesian revenue maximization when selling two goods to an additive risk-neutral quasilinear buyer was introduced by Hart and Nisan (2013), who give an upper bound of $O(\frac{1}{\varepsilon^4})$ for this problem. Using the optimal-transport duality framework of Daskalakis et al. (2013, 2015), we derive the first lower bound for this problem - of $\Omega(\frac{1}{\sqrt[4]{\varepsilon}})$, even when the values for the two goods are drawn i.i.d. from "nice" distributions, establishing how to reason about approximately optimal mechanisms via this duality framework. This bound implies, for any fixed number of goods, a tight bound of $\Theta(\log\frac{1}{\varepsilon})$ on the minimum deterministic communication complexity guaranteed to suffice for running some approximately revenue-maximizing mechanism, thereby completely resolving this problem. As a secondary result, we show that under standard economic assumptions on distributions, the above upper bound of Hart and Nisan (2013) can be strengthened to $O(\frac{1}{\varepsilon^2})$.