Prior-independent Auctions for Risk-averse Agents

TL;DR

This paper demonstrates that simple, prior-independent auctions like the first-price auction can approximately achieve optimal revenue for risk-averse agents, with extensions to asymmetric cases and new technical methods.

Contribution

It introduces a framework showing simple auctions approximate optimal revenue for risk-averse agents, including symmetric and asymmetric cases, with novel bounding and payment techniques.

Findings

First-price auction approximates optimal revenue for symmetric risk-averse agents.

Simple auctions extend to asymmetric risk-averse agents.

New methods for bounding revenue and payment identities for risk-averse mechanisms.

Abstract

We study simple and approximately optimal auctions for agents with a particular form of risk-averse preferences. We show that, for symmetric agents, the optimal revenue (given a prior distribution over the agent preferences) can be approximated by the first-price auction (which is prior independent), and, for asymmetric agents, the optimal revenue can be approximated by an auction with simple form. These results are based on two technical methods. The first is for upper-bounding the revenue from a risk-averse agent. The second gives a payment identity for mechanisms with pay-your-bid semantics.