The menu complexity of "one-and-a-half-dimensional" mechanism design

TL;DR

This paper investigates the menu complexity of auctions in a one-and-a-half-dimensional setting, revealing exponential complexity for exact optimality and polynomial bounds for approximate solutions, with implications for auction design.

Contribution

It establishes the exponential menu complexity needed for exact optimal auctions and provides polynomial bounds for approximate mechanisms, resolving open questions in auction complexity.

Findings

Exponential menu complexity is necessary for exact optimal auctions.

Polynomial menu complexity suffices for near-optimal revenue approximation.

Certain instances require quadratic menu complexity for high-accuracy approximations.

Abstract

We study the menu complexity of optimal and approximately-optimal auctions in the context of the "FedEx" problem, a so-called "one-and-a-half-dimensional" setting where a single bidder has both a value and a deadline for receiving an [FGKK16]. The menu complexity of an auction is equal to the number of distinct (allocation, price) pairs that a bidder might receive [HN13]. We show the following when the bidder has $n$ possible deadlines: - Exponential menu complexity is necessary to be exactly optimal: There exist instances where the optimal mechanism has menu complexity is $2^n-1$. This matches exactly the upper bound provided by Fiat et al.'s algorithm, and resolves one of their open questions [FGKK16]. - Fully polynomial menu complexity is necessary and sufficient for approximation: For all instances, there exists a mechanism guaranteeing a multiplicative (1-\epsilon)-approximation to the optimal revenue with menu complexity $O(n^{3/2}\sqrt{\frac{\min\{n/\epsilon,\ln(v_{\max})\}}{\epsilon}}) = O(n^2/\epsilon)$, where $v_{\max}$ denotes the largest value in the support of integral distributions. - There exist instances where any mechanism guaranteeing a multiplicative $(1-O(1/n^2))$-approximation to the optimal revenue requires menu complexity $\Omega(n^2)$. Our main technique is the polygon approximation of concave functions [Rote19], and our results here should be of independent interest. We further show how our techniques can be used to resolve an open question of [DW17] on the menu complexity of optimal auctions for a budget-constrained buyer.