This works:
CREATE OR REPLACE FUNCTION avg_purchases(last_names text[] = '{}')
RETURNS TABLE(last_name text, avg_purchase_size float8)
LANGUAGE sql AS
$func$
SELECT last_name, avg(purchase_size)::float8
FROM purchases
WHERE last_name = ANY($1)
GROUP BY last_name
$func$;
Call:
SELECT * FROM avg_purchases('{foo,Bar,baz,"}weird_name''$$"}');
Or (example with dollar-quoting):
SELECT * FROM avg_purchases($x${foo,Bar,baz,"}weird_name'$$"}$x$);
How to quote string literals:
You don't need dynamic SQL here.
While you can wrap it into a plpgsql function (which may be useful), a simple SQL function is doing the basic job just fine.
You had type mismatches:
The result of avg() may be numeric to hold a precise result. A cast to float8 (alias for double precision) makes it work. For perfect precision, use numeric instead.
The OUT parameter last_name must be text instead of text[].
VARIADIC
An array is a useful type of input. If it's easier for your client you can also use a VARIADIC input parameter that allows to pass the array as a list of elements:
CREATE OR REPLACE FUNCTION avg_purchases(VARIADIC last_names text[] = '{}')
RETURNS TABLE(last_name text, avg_purchase_size float8)
LANGUAGE sql AS
$func$
SELECT last_name, avg(purchase_size)::float8
FROM purchases
JOIN (SELECT unnest($1)) t(last_name) USING (last_name)
GROUP BY 1
$func$;
Call:
SELECT * FROM avg_purchases('foo', 'Bar', 'baz', '"}weird_name''$$"}');
Or (with dollar-quoting):
SELECT * FROM avg_purchases('foo', 'Bar', 'baz', $y$'"}weird_name'$$"}$y$);
Stock Postgres only allows a maximum of 100 elements. This is determined at compile time by the preset option:
max_function_args (integer)
Reports the maximum number of function arguments. It is determined by the value of FUNC_MAX_ARGS when building the server. The default value is 100 arguments.
You can still call it with array notation when prefixed with the keyword VARIADIC:
SELECT * FROM avg_purchases(VARIADIC '{1,2,3, ... 99,100,101}');
For bigger arrays (100+), consider unnest() in a subquery and JOIN to it, tends to scale better:
SELECT avg_purchases($${Brown,Smith,Jones}$$)orSELECT avg_purchases('{Brown,Smith,Jones}')