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Winner-Pays-Bid Auctions Minimize Variance (2403.04856v3)
Published 7 Mar 2024 in cs.GT
Abstract: Any social choice function (e.g., the efficient allocation) can be implemented using different payment rules: first-price, second-price, all-pay, etc. All of these payment rules are guaranteed to have the same expected revenue by the revenue equivalence theorem, but have different distributions of revenue, leading to a question of which one is best. We prove that among all possible payment rules, winner-pays-bid minimizes the variance in revenue and, in fact, minimizes any convex risk measure.
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