On Optimal Single-Item Auctions

We revisit the problem of designing the profit-maximizing single-item auction, solved by Myerson in his seminal paper for the case in which bidder valuations are independently distributed. We focus on general joint distributions, seeking the optimal deterministic incentive compatible auction. We give a geometric characterization of the optimal auction through a duality theorem, resulting in an efficient algorithm for finding the optimal deterministic auction in the two-bidder case and an inapproximability result for three or more bidders. 

• Type: Journal
• Year: 2010
• Where: CORR
• Authors: Christos H. Papadimitriou, George Pierrakos
• Keywords: CORR 2010, Education, Optimal Deterministic Auction, Optimal Deterministic Incentive, Profit-maximizing Single-item Auction