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Optimal Financially Constrained Bidding in Multiple Simultaneous Auctions

Optimal Financially Constrained Bidding in Multiple Simultaneous Auctions
Optimal Financially Constrained Bidding in Multiple Simultaneous Auctions
We consider optimal procedures for bidders participating in multiple simultaneous second-price auctions. Previous research has shown that, for such a setting, it is optimal to bid strictly positive in all available auctions, even if only a single item is required. In this paper, we investigate how the bidding strategy changes when the bidder is financially constrained such that its exposure (i.e. the sum of its bids) is limited.We prove (in the case of two auctions) that when the financial constraint is equal or less than the buyer’s valuation, it is typically optimal to participate in a single auction. We also find that the optimal strategy changes fundamentally if budget constraints are introduced. In particular, whereas without budget contraints in many cases the problem of finding the optimal strategy reduces to two dimensions, this is no longer the case if the bids are constrained. Finding the optimal policy thus becomes much more involved.
3-540-77553-6
190-199
Springer Verlag
Dash, Rajdeep
6c83d6ec-5b7d-4fd9-ab62-0394a8181ff4
Gerding, Enrico
d9e92ee5-1a8c-4467-a689-8363e7743362
Jennings, Nick
ab3d94cc-247c-4545-9d1e-65873d6cdb30
Dash, Rajdeep
6c83d6ec-5b7d-4fd9-ab62-0394a8181ff4
Gerding, Enrico
d9e92ee5-1a8c-4467-a689-8363e7743362
Jennings, Nick
ab3d94cc-247c-4545-9d1e-65873d6cdb30

Dash, Rajdeep, Gerding, Enrico and Jennings, Nick (2008) Optimal Financially Constrained Bidding in Multiple Simultaneous Auctions. In, Negotiation, Auctions, and Market Engineering. Springer Verlag, pp. 190-199.

Record type: Book Section

Abstract

We consider optimal procedures for bidders participating in multiple simultaneous second-price auctions. Previous research has shown that, for such a setting, it is optimal to bid strictly positive in all available auctions, even if only a single item is required. In this paper, we investigate how the bidding strategy changes when the bidder is financially constrained such that its exposure (i.e. the sum of its bids) is limited.We prove (in the case of two auctions) that when the financial constraint is equal or less than the buyer’s valuation, it is typically optimal to participate in a single auction. We also find that the optimal strategy changes fundamentally if budget constraints are introduced. In particular, whereas without budget contraints in many cases the problem of finding the optimal strategy reduces to two dimensions, this is no longer the case if the bids are constrained. Finding the optimal policy thus becomes much more involved.

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More information

Published date: 2008
Organisations: Agents, Interactions & Complexity

Identifiers

Local EPrints ID: 267208
URI: http://eprints.soton.ac.uk/id/eprint/267208
ISBN: 3-540-77553-6
PURE UUID: a656a69e-460d-4a4c-9425-e552b99e27c4
ORCID for Enrico Gerding: ORCID iD orcid.org/0000-0001-7200-552X

Catalogue record

Date deposited: 26 Mar 2009 18:26
Last modified: 27 Jun 2020 00:29

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Contributors

Author: Rajdeep Dash
Author: Enrico Gerding ORCID iD
Author: Nick Jennings

University divisions

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