Auction protocols

The word “auction” generally refers to a mechanism for allocating one or more resources to one or more parties (or bidders). Generally, once the allocation is determined, some amount of money changes hands; the precise monetary transfers are determined by the auction process. While in some auction protocols, such as the English auction, bidders repeatedly increase their bids in an attempt to outbid each other, this is not an essential component of an auction. There are many other auction protocols, and we will study some of them in this chapter. Auctions have traditionally been studied mostly by economists. In recent years, computer scientists have also become interested in auctions, for a variety of reasons. Auctions can be useful for allocating various computing resources across users. In artificial intelligence, they can be used to allocate resources and tasks across multiple artificially intelligent “agents.” Auctions are also important in electronic commerce: there are of course several well-known auction websites, but additionally, search engines use auctions to sell advertising space on their results pages. Finally, increased computing power and improved algorithms have made new types of auctions possible—most notably combinatorial auctions, in which multiple items are for sale in the same auction, and bidders can bid on bundles of items. We begin this chapter by studying single-item auctions. Even though most computer scientists are perhaps more interested in combinatorial auctions, single-item auctions allow us to more easily introduce certain concepts that are also of key importance in combinatorial auctions.