Computationally efficient and revenue optimized auctioneer's strategy for expanding auctions

Onn Shehory, Eran Dror

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

1 Scopus citations

Abstract

An expanding auction - a special type of an ascending-price open-cry auction - allows the auctioneer to dynamically add (identical) items to the single item offered initially. Expanding auctions are becoming an increasingly popular business-toconsumer auction mechanism. The auctioneer's revenue from an expanding auction depends, in large part, on its schedule for increasing the number of units offered. As we show, the naïve strategies commonly used for increasing the number of items offered in contemporary e-commerce implementations of expanding auctions are sub-optimal. In this study we provide a strategy that, given some assumptions about buyers' behaviors, maximizes the expected revenues of the auctioneer in an expanding auction. We model the auction process as a state graph in which nodes are auction states and edges are transitions. With this model, finding the optimal strategy is equivalent to solving a search problem on the state graph. We prove that the search problem to be solved, although seemingly exponentially complex, is actually linearly bounded. Based on this result, we introduce an informed decision strategy that optimizes the auctioneer's revenue.

Original languageEnglish
Title of host publicationProceedings of the Fifth International Joint Conference on Autonomous Agents and Multiagent Systems
Pages1175-1182
Number of pages8
DOIs
StatePublished - 2006
Externally publishedYes
EventFifth International Joint Conference on Autonomous Agents and Multiagent Systems, AAMAS - Hakodate, Japan
Duration: 8 May 200612 May 2006

Publication series

NameProceedings of the International Conference on Autonomous Agents
Volume2006

Conference

ConferenceFifth International Joint Conference on Autonomous Agents and Multiagent Systems, AAMAS
Country/TerritoryJapan
CityHakodate
Period8/05/0612/05/06

Keywords

  • Auctioneer's revenue
  • Expanding auction

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