Making difficult auctions easy

To maximise revenue from an auction, an important question is how to design it. A combinatorial auction is one where bids are allowed not only on individual items, but on combinations of items, called packages, as well. The auctioneer aims to accept the bids that together maximise revenue. This is called the winner determination problem — a mathematical problem. As the number of items in an auction increases, the number of steps required to design the optimal combination increases exponentially, and so does the time required to solve the puzzle. Together with his colleague Frank Kelly, Richard Steinberg developed a combinatorial auction procedure called PAUSE (Progressive Adaptive User Selection Environment) in which the auctioneer never faces the winner determination problem.