Optimal Auction Design

Optimal auction design involves creating rules for selling items that maximize the seller’s expected gain, considering how bidders might value and bid for the item. It aims to encourage honest bidding and allocate the item efficiently, often by setting reserve prices or bidding formats that balance the seller’s profit with fairness. The goal is to craft the auction in a way that extracts the highest possible value while maintaining incentive compatibility, meaning bidders reveal their true valuations. This strategic setup helps sellers maximize revenue while ensuring a fair and transparent process for bidders.