Title: Auctions vs Negotiations in Irregular Markets

Abstract: The classic result of Bulow and Klemperer [BK96] says that
recruiting one more bidder and running the Vickrey auction achieves higher
revenue than running the optimal auction with the initial set of bidders.
This result holds for the standard single item auction setting when
bidders' values are drawn i.i.d from a distribution that satisfies a
technical regularity condition. However distributions that violate the
regularity condition are quite common and the i.i.d condition is quite
restrictive. We give a version of Bulow and Klemperer's result for
settings where bidders' values are drawn from non-i.i.d irregular
distributions. Bulow and Klemperer's result says that it is better to run
an advertising campaign to recruit one more bidder and run the Vickrey
auction than to conduct market analysis and learn the distributions well
to run the optimal auction. Our result says that for non-i.i.d irregular
settings it is approximately optimal to conduct a targeted advertising
campaign to recruit a few heterogeneous bidders and run the Vickrey
auction.

Joint work with Vasilis Syrgkanis from Cornell University.

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