A Primal-Dual Approach to Randomized Online Bidding with Tail Constraints
Controlling tail risk in randomized algorithms has received increasing attention. Randomized online algorithms can achieve a lower expected competitive ratio than the competitive ratio of the best deterministic online algorithm. However, individual executions may still incur poor outcomes. Tail constraints address this risk by limiting the probability that the incurred ratio exceeds a prescribed threshold. We investigate how such constraints affect the structure and performance of randomized online bidding algorithms. By revisiting the classical primal-dual lower-bound framework for online bidding, we find that restricting the growth between consecutive bids can yield a stronger lower bound on the expected competitive ratio. We then show that tail constraints with zero exceedance probability impose an asymptotic upper bound on the ratios between consecutive bids. Incorporating this structural property into the primal-dual framework allows us to derive a stronger lower bound. Moreover, the dual analysis suggests a randomized geometric bidding algorithm whose performance matches this bound. The insight from our primal-dual analysis also guides the design of algorithms for general tail constraints allowing positive exceedance probabilities. Motivated by the geometric growth suggested by the dual solution, we study randomized periodic bidding algorithms. We show that, for any fixed geometric base, the uniform offset distribution is optimal in terms of both the expected competitive ratio and tail-constraint feasibility. We then characterize the exceedance probability of these algorithms and use this characterization to choose a geometric growth factor that satisfies the prescribed tail constraints, establishing parameter-dependent upper bounds on the optimal expected competitive ratio.