Optimal auction strategy boosts revenue and efficiency in competitive markets.
The article explores the best way for a seller to auction off a single item to multiple buyers, while competing with another seller. The researchers found that the optimal strategy involves setting prices based on the buyers' valuations and withholding the item from certain buyers. This strategy can generate more revenue than simply setting a reserve price. The findings also apply to procurement auctions, where buyers compete for a seller's goods or services.