We present a simple auction mechanism which extends the second-price auction with reserve and is truthful in expectation. This mechanism is particularly effective in private value environments where the distribution of valuations are irregular. Bidders can "buy-it-now", or alternatively "take-a-chance" where the top  d  bidders are equally likely to win. The randomized take-a-chance allocation incentivizes high valuation bidders to buy-it-now. We show that for a large class of valuations, this mechanism achieves similar allocations and revenues as Myerson's optimal mechanism, and outperforms the second-price auction with reserve.   In addition, we present an evaluation of bid data from Microsoft's AdECN platform. We find the valuations are irregular, and counterfactual experiments suggest our BIN-TAC mechanism would improve revenue by 11% relative to an optimal second-price mechanism with reserve.
['L. Elisa Celis', 'Gregory D. Lewis', 'Markus Mobius', 'Hamid Nazerzadeh']
Buy-it-now or take-a-chance: a simple sequential screening mechanism