Mechanism design via correlation gap

For revenue and welfare maximization in single-dimensional Bayesian settings, Chawla et al. (STOC10) recently showed that sequential posted-price mechanisms (SPMs), though simple in form, can perform surprisingly well compared to the optimal mechanisms. In this paper, we give a theoretical explanation of this fact, based on a connection to the notion of correlation gap. Loosely speaking, for auction environments with matroid constraints, we can relate the performance of a mechanism to the expectation of a monotone submodular function over a random set. This random set corresponds to the winner set for the optimal mechanism, which is highly correlated, and corresponds to certain demand set for SPMs, which is independent. The notion of correlation gap of Agrawal et al. (SODA10) quantifies how much we "lose" in the expectation of the function by ignoring correlation in the random set, and hence bounds our loss in using certain SPM instead of the optimal mechanism. Furthermore, the correlation gap of a monotone and submodular function is known to be small, and it follows that certain SPM can approximate the optimal mechanism by a good constant factor. Exploiting this connection, we give tight analysis of a greedy-based SPM of Chawla et al. for several environments. In particular, we show that it gives an e/(e − 1)-approximation for matroid environments, gives asymptotically a 1/(1--1/√2πk)-approximation for the important sub-case of k-unit auctions, and gives a (p + 1)-approximation for environments with p-independent set system constraints.