Chapter 8 OPPORTUNITY COST ALGORITHMS FOR COMBINATORIAL AUCTIONS

Two general algorithms based on opportunity costs are given for approximating a revenue-maximizing set of bids an auctioneer should accept, in a combinatorial auction in which each bidder offers a price for some subset of the available goods and the auctioneer can only accept non-intersecting bids. Since this problem is difficult even to approximate in general, the algorithms are most useful when the bids are restricted to be connected node subsets of an underlying object graph that represents which objects are relevant to each other. The approximation ratios of the algorithms depend on structural properties of this graph and are small constants for many interesting families of object graphs. The running times of the algorithms are linear in the size of the bid graph, which describes the conflicts between bids. Extensions of the algorithms allow for efficient processing of additional constraints, such as budget constraints that associate bids with particular bidders and limit how many bids from a particular bidder can be accepted.