In class we used the Bulow-Klemperer Theorem to prove an approximation result. For n agents with...
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In class we used the Bulow-Klemperer Theorem to prove an approximation result. For n agents with i.i.d. and regularly distributed values, the revenue of the second-price auction is a n/(n-1) approximation to the revenue optimal mechanism. Specifically, writing this approximation bound as (1+ɛ) the ɛ is decreasing in n as 1/n. For monotone hazard rate distributions, i.e., where f(x)/(1-F(x)) is monotonically non-decreasing, this bound can be improved to be exponentially decreasing in n, i.e., where ɛ is O(c¯^) for some constant c. State and prove this result for the best constant c that you can identify. In class we used the Bulow-Klemperer Theorem to prove an approximation result. For n agents with i.i.d. and regularly distributed values, the revenue of the second-price auction is a n/(n-1) approximation to the revenue optimal mechanism. Specifically, writing this approximation bound as (1+ɛ) the ɛ is decreasing in n as 1/n. For monotone hazard rate distributions, i.e., where f(x)/(1-F(x)) is monotonically non-decreasing, this bound can be improved to be exponentially decreasing in n, i.e., where ɛ is O(c¯^) for some constant c. State and prove this result for the best constant c that you can identify.
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