Dynamic Pricing and Auction - Department of Industrial Engineering ...

Efficiency Vs. optimality• Optimal auctions are designed to maximize the expected revenue of theseller by using a set of tools including posing a reserve price or chargingan entry fee, whereas the objective of efficient auctions is to maximizethe social welfare, the sum of the players' surplus.• Efficient i design aims to maximize i the system welfare, whereas theoptimal design aims to maximize the seller's individual revenue.• Since optimality and efficiency usually cannot be achievedsimultaneously, the auction designers have to make the choice before hestates the rules of the auction.• A financial self-interested agent may prefer the optimal auctions while a• A financial self-interested agent may prefer the optimal auctions, while apublic agent like the government may prefer the efficient auctions to gainmore social welfare. Nevertheless, all agents need to balance optimalityand efficiency to make the auctions practical.