CS 269 I : Incentives in Computer Science Lecture # 16 : Revenue - Maximizing Auctions ∗

Thus far, we’ve focused on the design of auctions that maximize the social welfare (at least in the case where bids are truthful). Welfare maximization is a first-order concern in many scenarios, and as we’ve seen, this objective has guided the design of auctions for sponsored search and online advertising more generally. Revenue is generated in welfare-maximizing auctions, but only as a side effect, a necessary evil to incentivize participants to report their private information. (Remember what happened when we tried to charge nothing in a single-item auction?) What if our goal is to maximize the seller’s revenue, rather than the social welfare? This lecture, our last on auction design, explains the changes that need to be made.