Designing A Limited Supply Online Auction

We examine the problem of designing a strategy-proof auction in an online setting. This means that agents can arrive and depart dynamically. Thus, the auction mechanism must be able to decide on the optimal allocation of goods based only on bid information from the agents that have already arrived and not on future arrivals. If a good is to be allocated to an agent, the mechanism must do so before that agent departs. We compare two different solutions to the limited supply online auction problem, each with its own set of assumptions and problem specific criteria. In conducting our survey, we note the emerging importance of comparing a mechanism’s performance in terms of revenue and efficiency by comparing it to the optimal revenue and efficiency. This emphasis on an algorithmic approach to mechanism design has been denoted as competitive analysis. We conclude our review of online mechanism design by discussing the important avenues for future work.