Thresholding at the monopoly price: an agnostic way to improve bidding strategies in revenue-maximizing auctions (1808.06979v5)

Abstract: We address the problem of improving bidders' strategies in prior-dependent revenue-maximizing auctions and introduce a simple and generic method to design novel bidding strategies if the seller uses past bids to optimize her mechanism. We propose a simple and agnostic strategy, independent of the distribution of the competition, that is robust to mechanism changes and local (as opposed to global) optimization of e.g. reserve prices by the seller. This strategy guarantees an increase in utility compared to the truthful strategy for any distribution of the competition. In textbook-style examples, for instance with uniform [0,1] value distributions and two bidders, this no-side-information and mechanism-independent strategy yields an enormous 57% increase in buyer utility for lazy second price auctions with monopoly reserves. When the bidder knows the distribution of the highest bid of the competition, we show how to optimize the tradeoff between reducing the reserve price and beating the competition. Our formulation enables to study some important robustness properties of the strategies, showing their impact even when the seller is using a data-driven approach to set the reserve prices. In this sample-size setting, we prove under what conditions, thresholding bidding strategies can still improve the buyer's utility. The gist of our approach is to see optimal auctions in practice as a Stackelberg game where the buyer is the leader, as he is the first one to move (here bid) when the seller is the follower as she has no prior information on the bidder.