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Designing bidding strategies in sequential auctions for risk averse agents

Record type: Article

Designing efficient bidding strategies for sequential auctions represents an important, open problem area in agent-mediated electronic markets. In existing literature, a variety of bidding strategies have been proposed and have been shown to perform with varying degrees of efficiency. However, most of strategies proposed so far do not explicitly model bidders attitudes towards risk which, in mainstream economic literature, is considered an essential attribute in modeling agent preferences and decision making under uncertainty. This paper studies the effect that risk profiles (modeled through the standard Arrow-Pratt risk aversion measure), have on the bidders strategies in sequential auctions. First, the sequential decision process involved in bidding is modeled as a Markov Decision Process. Then, the effect that a bidders risk aversion has on her decision theoretic optimal bidding policy is analyzed, for a category of expectations of future price distributions. This analysis is performed separately for the case of first price and second-price sequential auctions. Next, the bidding strategies developed above are simulated, in order to study the effect that an agents risk aversion has on the chances of winning a set of complementary-valued items. The paper concludes with an experimental study of how the presence of risk-averse bidders affects both bidder profits and auctioneer revenue, for different market scenarios of increasing complexity.

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Citation

Robu, Valentin and La Poutre, Han (2010) Designing bidding strategies in sequential auctions for risk averse agents Multi-Agent and Grid Systems, 6, (5), pp. 437-457.

More information

Published date: 27 December 2010
Organisations: Agents, Interactions & Complexity

Identifiers

Local EPrints ID: 268193
URI: http://eprints.soton.ac.uk/id/eprint/268193
PURE UUID: 652cd14a-2880-4984-9a4c-3a76718509f6

Catalogue record

Date deposited: 11 Nov 2009 17:43
Last modified: 18 Jul 2017 06:56

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Contributors

Author: Valentin Robu
Author: Han La Poutre

University divisions


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