Revenue Monotonicity in Combinatorial Auctions

Intuitively, one might expect that a seller’s revenue from an auction weakly increases as the number of bidders grows, as this increases competition. However, it is known that for combinatorial auctions that use the VCG mechanism, a seller can sometimes increase revenue by dropping bidders. In this paper we investigate the extent to which this problem can occur under other dominant-strategy combinatorial auction mechanisms. Our main result is that such failures of “revenue monotonicity” are not limited to mechanisms that achieve efficient allocations. Instead, they can occur under any dominant-strategy direct mechanism that sets prices using critical values, and that always chooses an allocation that cannot be augmented to make some bidder better off, while making none worse off.

Authors

• Baharak Rastegari University of Southampton

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