truthful bundle multiunit double auctions we address the mechanism design problem for a market with multiple buyers and sellers each buyer demands some bundle s of various commodities and each seller supplies multiple units of one commodity to design truthful double auction mechanisms we propose a novel padding method that intentionally creates imbalances between the supply availability and demand requirement by introducing a phantom buyer with unlimited budget to the best of our knowledge this padding method leads to a class of mechanisms that are the first strategy proof individually rational budget balanced and asymptotically efficient mechanisms for the specified exchange environment furthermore these mechanisms dominate known truthful bundle single unit mechanisms with higher efficiency lower buying prices and higher selling prices

revenue maximizing dutch auctions with discrete bid levels abstract this paper is concerned with setting a predetermined number of bid levels in a dutch auction to maximize the auctioneer s expected revenue as a departure from the traditional methods used by applied economists and game theorists a novel approach is taken in this study to tackle the problem by formulating the auctioning process as a constrained nonlinear program and applying standard optimization techniques to solve it aside from proposing respective closed form formulae for computing the optimal bid levels and the auctioneer s maximum expected revenue we also show that the bid decrements should be increasing if there are two or more bidders in the dutch auction additionally the auctioneer s maximum expected revenue increases with the number of bidders as well as the number of bid levels finally managerial implications of the key findings as well as limitations of this research work are discussed

time consistency and bureaucratic budget competition high employment protection in the public sector results in strategic over employment if government divisions compete for budgets in a dynamic setting bureaucrats who are interested in maximising their divisions output employ excess labour since this induces the sponsor to provide complementary inputs in the future restrictions on hiring decisions in the public sector can be regarded as provisions to reduce strategic hiring we also provide evidence from a survey of decision makers in a public sector bureaucracy with very high employment protection the results confirm that decision makers are aware of the strategic effects of their hiring decisions on budget allocation 2008 the author s journal compilation royal economic society 2008

managing online auctions current business and research issues the internet s computational power and flexibility have made auctions a widespread and integral part of both consumer and business markets though online auctions are a multi billion dollar annual activity with a growing variety of sophisticated trading mechanisms scientific research on them is at an early stage this paper analyzes the current state of management science research on online auctions it develops a broad research agenda for issues such as the behavior of online auction participants the optimal design of online auctions the integration of auctions into the ongoing operation of firms and the use of the data generated by online auctions to inform future trading mechanisms these research areas will draw from applied and theoretical work spanning management science economics and information systems

optimal auctioning and ordering in an infinite horizon inventory pricing system we consider a joint inventory pricing problem in which buyers act strategically and bid for units of a firm s product over an infinite horizon the number of bidders in each period as well as the individual bidders valuations are random but stationary over time there is a holding cost for inventory and a unit cost for ordering more stock from an outside supplier backordering is not allowed the firm must decide how to conduct its auctions and how to replenish its stock over time to maximize its profits we show that the optimal auction and replenishment policy for this problem is quite simple consisting of running a standard first price or second price auction with a fixed reserve price in each period and following an order up to basestock policy for replenishing inventory at the end of each period moreover the optimal basestock level can be easily computed we then compare this optimal basestock reserve price auction policy to a traditional basestock list price policy we prove that in the limiting case of one buyer per period and in the limiting case of a large number of buyers per period and linear holding cost list pricing is optimal list pricing also becomes optimal as the holding cost tends to zero numerical comparisons confirm these theoretical results and show that auctions provide significant benefits when 1 the number of buyers is moderate 2 holding costs are high or 3 there is high variability in the number of buyers per period

matching users rights to available groundwater abstract the amount of available groundwater in a catchment changes quickly and the amount of water that users can take sustainably depends on where and when it is taken however rights to water tend to be fixed and obtaining rights to water incurs high transaction costs as a result water catchments are over allocated worldwide in this paper i show how a catchment manager could match users rights to the available water in near real time despite uncertain future inflows while making effective use of all available hydrological data the solution uses the framework of a smart market a smart market is a periodic auction cleared with the help of an optimization model in addition to market clearing this model allows a convenient means to adjust initial rights and the auction revenue reflects the available water relative to users rights when the auction is revenue neutral the catchment may be viewed as allocated perfectly i suggest several ways in which a catchment manager can find this revenue neutral allocation assuming the manager has authority to adjust initial rights

optimal dynamic auctions for revenue management we analyze a dynamic auction in which a seller withc units to sell faces a sequence of buyers separated intot time periods each group of buyers has independent private values for a single unit buyers compete directly against each other within a period as in a traditional auction and indirectly with buyers in other periods through the opportunity cost of capacity assessed by the seller the number of buyers in each period as well as the individual buyers valuations are random the model is a variation of the traditional single leg multiperiod revenue management problem in which consumers act strategically and bid for units of a fixed capacity over time for this setting we prove that dynamic variants of the first price and second price auction mechanisms maximize the seller s expected revenue we also show explicitly how to compute and implement these optimal auctions the optimal auctions are then compared to a traditional revenue management mechanism in which list prices are used in each period together with capacity controls and to a simple auction heuristic that consists of allocating units to each period and running a sequence of standard multiunit auctions with fixed reserve prices in each period the traditional revenue management mechanism is proven to be optimal in the limiting cases when there is at most one buyer per period when capacity is not constraining and asymptotically when the number of buyers and the capacity increases the optimal auction significantly outperforms both suboptimal mechanisms when there are a moderate number of periods capacity is constrained and the total volume of sales is not too large the benefit also increases when variability in the dispersion in buyers valuations or in the number of buyers per period increases

measuring the frictional costs of online transactions the case of a name your own price channel we study the offers submitted by consumers to a large name your own price nyop online retailer a distinctive feature of this retailer is that it allows consumers to repeatedly submit offers on one and the same product while consumers could identify the threshold price the minimum price for which the retailer is willing to sell by incrementing their offer in small steps in each consecutive round such a strategy would require them to go through many additional online transactions we define frictional cost as the disutility that the consumer experiences when conducting an online transaction such as submitting an offer thus in our setting consumers trade off a direct financial value lower price for frictional costs based on a consumer choice model capturing this trade off we use the observed consumer behavior to reconstruct the frictional cost parameters for the consumers in our sample we show that perhaps contrary to the general wisdom frictional costs in electronic markets are substantial with median values ranging from eur 3 54 for a portable digital music player mp3 to eur 6 08 for a personal digital assistant pda we find that consumers who have gathered experience with the nyop channel in previous transactions exhibit lower frictional costs than consumers who use the channel for the first time surprisingly sociodemographic variables do not help to explain the variation in frictional costs

sequentially optimal auctions abstract in auctions where a seller can post a reserve price but if the object fails to sell cannot commit never to attempt to resell it revenue equivalence between repeated first price and second price auctions without commitment results when the time between auctions goes to zero seller expected revenues converge to those of a static auction with no reserve price with many bidders the seller equilibrium reserve price approaches the reserve price in an optimal static auction an auction in which the simple equilibrium reserve price policy of the seller mirrors a policy commonly used by many auctioneers is computed journal of economic literature classification numbers c78 d44 d82

the effects of information transparency on suppliers manufacturers and consumers in online markets this paper looks into the effects of information transparency on market participants in an online trading environment we study these effects in business to business electronic markets with firms competing in both upstream and downstream industries the prior literature generally assumes that either the downstream firm buyer or the upstream firm seller is a monopoly it is not clear whether information transparency would still create value if both buyers and sellers face oligopolistic competition where the benefits of information transparency could be competed away to answer this question we first develop a simple two echelon e market model and then extend the model to more general settings we find that information transparency can create value for the overall e market yet it affects buyers and sellers very differently one side will be hurt depending on the competition mode cournot or bertrand in the downstream this suggests that a manufacturer owned a supplier owned and a neutral e market will have different preferences for information transparency finally we find that information transparency can hurt consumers when the downstream industry engages in bertrand competition this is a surprising result given the expectation that online markets create substantial value for consumers

the evolutionary stability of auctions over bargaining this paper considers equilibrium in transaction mechanisms in an environment with homogeneous buyers and sellers which eliminates the advantage auctions possess of matching buyers and sellers both auctions and bargaining are equilibria however only auctions are evolutionarily stable this identifies a new advantage of auctions over bargaining arising from the division of the gains from trade journal of economic literatureclassification numbers c78 c73 d44

optimal minimum bids and inventory scrapping in sequential single unit vickrey auctions with demand learning abstract retailers often conduct sequential single unit auctions and need to decide the minimum bid in each auction to reduce inventory costs it may be optimal to scrap some of the inventory rather than holding it until it is auctioned off in some auctions the seller may be uncertain about the market response and hence may want to dynamically learn the demand by observing the number of posted bids we formulate a markov decision process mdp to study this dynamic auction design problem under the vickrey mechanism we first develop a clairvoyant model where the seller knows the demand distribution we prove that it is optimal to scrap all inventory above a certain threshold and then auction the remaining units we derive a first order necessary condition whereby the bidders virtual value at an optimal minimum bid equals the seller s marginal profit this is a generalization of riley and samuelson s result from the one single unit auction case when the virtual value is strictly increasing this necessary condition is also sufficient and leads to a structured value iteration algorithm we then assume that the number of bidders is poisson distributed but the seller does not know its mean the seller uses a mixture of gamma prior on this mean and updates this belief over several auctions this results in a high dimensional bayesian mdp whose exact solution is intractable we therefore propose and compare two approximation methods called certainty equivalent control cec and q function approximation numerical experiments suggest that q function approximation can attain higher revenues than cec

auctions versus posted price selling two popular selling methods posted price selling and auctions are compared here in an independent private values model without auctioning costs auctioning is always optimal when auctioning is costly auctions are still preferable if the marginal revenue curve is sufficiently steep the global steepness of the marginal revenue curve is found to coincide with the dispersion around the mean for a number of standard distributions finally the prices of the monopoly seller and of the social optimum are compared copyright 1993 by american economic association

design competition through multidimensional auctions this article studies design competition in government procurement by developing a model of two dimensional auctions wherefirms bid on both price and quality and bids are evaluated by a scoring rule designed by a buyer three auction schemes first score second score and second preferred offer are introduced and related to actual practices if the buyer can commit to a scoring rule in his best interest the resulting optimal scoring rule underrewards quality relative to the buyer s utility function and implements the optimal outcome for the buyer underfirst and second score auctions absent the commitment power the onlyfeasible scoring rule is the buyer s utility function under which 1 all three schemes yield the same expected utility to the buyer and 2 first and second score auctions induce the first best level of quality which turns out to be excessive from the buyer s point of view

selecting optimal selling format of a product in b2c online auctions with boundedly rational customers abstract the advancement of internet technology has enabled new formats for selling products in the b2c online auctions at present on the major online auction sites there exist three popular selling formats namely the posted price pure auction and buy price auction formats it is an important decision problem for a firm to select the most profitable format to sell its products through the internet the customer behavior is of course a crucial element of the decision process to the best of our knowledge most models available today assume that customers are perfectly rational to better understand the decision process in this paper we incorporate the concept of bounded rationality into consideration we first present a behavior choice function to characterize the behavior of the customers with bounded rationality then corresponding to each selling format we construct a revenue model based on the bounded rationality for analysis finally we conduct some elaborate computational experiments to investigate the performance of each revenue model for developing new managerial insights our computational results clearly demonstrate how the bounded rationality of customer behavior affects the choice of a preferable selling format for a b2c firm in an online auction

an efficient ascending bid auction for multiple objects when bidders exhibit multi unit demands standard auction methods generally yield inefficient outcomes this article proposes a new ascending bid auction for homogeneous goods such as treasury bills or telecommunications spectrum the auctioneer announces a price and bidders respond with quantities items are awarded at the current price whenever they are clinched and the price is incremented until the market clears with private values this dynamic auction yields the same outcome as the sealed bid vickrey auction but has advantages of simplicity and privacy preservation with interdependent values this auction may retain efficiency whereas the vickrey auction suffers from a generalized winner s curse

total cost procurement auctions impact of suppliers cost adjustments on auction format choice we consider sealed and open bid total cost procurement auctions where two attributes are used for contract award decisions price which is bid by the supplier and a fixed cost adjustment which is included by the buyer to capture nonprice factors such as logistics costs suppliers know only their own true production cost and their own cost adjustment and the buyer does not know the suppliers true production costs but does know all suppliers cost adjustments which she herself sets in order to make an informed total cost decision the buyer who seeks to minimize her total price and cost adjustment procurement cost can choose to run a first price sealed bid auction where suppliers bids are affected by their beliefs about each other s total costs or a descending open bid auction where only the actual realizations of suppliers total costs drive the auction outcome we characterize the buyer s choice between the two formats as a threshold decision over suppliers cost adjustments and analyze the effect of supplier beliefs on her decision we also study the impact of additional suppliers on the buyer s decision the effect of correlation between suppliers production costs and their cost adjustments and additive as well as multiplicative total cost functions the results suggest that procurement managers can use their evaluations of suppliers cost adjustments to make better auction format decisions

pennies from ebay the determinants of price in online auctions this paper presents an exploratory analysis of the determinants of prices in online auctions for collectible united states one cent coins at the ebay web site starting with an initial data set of 20 000 auctions we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value we have three major findings first a seller s feedback ratings reported by other ebay users have a measurable effect on her auction prices negative feedback ratings have a much greater effect than positive feedback ratings do second minimum bids and reserve prices have positive effects on the final auction price in particular minimum bids appear only to have a significant effect when they are binding on a single bidder as predicted by theory third when a seller chooses to have her auction last for a longer period of days this significantly increases the auction price on average

successfully selling accommodation packages at online auctions the case of ebay austria in this era of e commerce online auctions have emerged as a valuable distribution channel nissanoff 2006 werthner ricci 2004 displaying low entry and exit barriers but also vast coverage rates online auctions may effectively augment the distribution potential of hotel businesses this paper identifies those factors that positively affect the final price level obtained in online auctions for hotel room vouchers based on data gathered at ebay comprising 53 406 auctions linear structural equation modelling sem was conducted to identify significant relationships between auction characteristics and the obtained final price for hotel room vouchers by drawing on these results and through an example of the austrian ebay platform selling strategies for successfully listing accommodation packages at online auctions are proposed

jump bidding strategies in internet auctions abidding strategy commonly observed in internet auctions is that of jump bidding or entering a bid larger than what is necessary to be a currently winning bidder in this paper we argue that the cost associated with entering online bids and the uncertainty about future entry both of which distinguish internet from live auctions can explain this behavior we present a simple theoretical model that includes the preceding characteristics and derive the conditions under which jump bidding arises in a format commonly used for online trading the ascending price auction we also present evidence recorded from hundreds of internet auctions that is consistent with some of the basic predictions from our model we find that jump bidding is more likely earlier in an auction when jumping has a larger strategic value and that the incentives to jump bid increase as competition increases our results also indicate that jump bidding is effective jump bidders place fewer bids overall and increased early jump bidding deters entry later in the auction we also discuss possible means of reducing bidding costs and evidence that internet auctioneers are pursuing this goal

auctions and bidding a primer maybe the contractor was right to think bid jobs are different but it is more likely that he suffered from too simple a view of what is involved in preparing a competitive bid our analysis will show that even an experienced estimator working in familiar terrain can lose money if he doesn t understand the subtleties of competitive bidding the phenomenon experienced by the painting contractor known as the winner s curse is just one of the surprising and puzzling conclusions that have been turned up by modern research into auctions another is the theoretical proposition supported also by some experimental evidence that for example a sealed bid treasury bill auction in which each buyer pays a price equal to the highest rejected bid would yield more revenue to the treasury than the current procedure in which the winning bidder pays the seemingly higher amount equal to his own bid there are also subtle results that demonstrate the equivalence of such apparently different institutions as the standard sealed bid auction in which the auctioneer seller sells the goods to the highest bidder for a price equal to his bid and the dutch auction in which the auctioneer seller begins by asking a high price and gradually lowers the price until

procuring fast delivery sole sourcing with information asymmetry this paper studies a queuing model in which a buyer sources a good or service from a single supplier chosen from a pool of suppliers the buyer seeks to minimize the sum of her procurement and operating costs the latter of which depends on the suppliers lead time the selected supplier can regulate his lead time but faster lead times are costly although the buyer selects the supplier to source from possibly via an auction and dictates the contractual terms the buyers bargaining power is limited by asymmetric information the buyer only has an estimate of the suppliers costs while the suppliers know their costs precisely we identify a procurement mechanism that minimizes the buyers total cost procurement plus operating this mechanism is not simple it is a numerically derived nonlinear menu of contracts therefore we study several simpler mechanisms e g one that charges a late fee and one that specifies a fixed lead time requirement no menus no nonlinear functions we find that simple mechanisms are nearly optimal generally within 1 of optimal because asymmetric information conveys significant protection to the supplier i e the supplier is able to retain most of the benefit of having a lower cost renegotiation is another concern with the optimal mechanism because it does not minimize the supply chains cost the firms can be both better off if they throw away the contract and start over interestingly we find that the potential gain from renegotiation is relatively small with either the optimal or our simple mechanisms we conclude that our simple mechanisms are quite attractive along all relevant dimensions buyers performance supply chain performance simplicity and robustness to renegotiation

inventory management with auctions and other sales channels optimality of s s policies we study periodic review inventory replenishment problems with fixed ordering costs and show the optimality of s s inventory replenishment policies inventory replenishment is instantaneous i e the lead time is zero we consider several sales mechanisms e g auction mechanisms name your own price mechanisms and multiple heterogeneous sales channels we prove this result by showing that these models satisfy a recently established sufficient condition for the optimality of s s policies thus this paper shows that the optimality of s s policies extends well beyond the traditional sales environments studied so far in the inventory literature

capacity management in order driven production networks a flexibility oriented approach to determine the size of a network capacity pool abstract assuming heterarchical production networks capacity management is faced with uncertainties of both network orders and network capacity in order to deal with these uncertainties we propose a flexible approach that combines capacity oriented pricing with two modes of providing network capacity capacity on demand and network capacity pool flexibility of this approach arises from additional degrees of freedom for matching capacity supply and demand the central problem of sizing the network capacity pool is solved iteratively by a decentralised planning process applying the top down bottom up principle in this paper we present the underlying formal models of the corporate level and the network level as well as the coordination procedure in order to illustrate the approach we provide a continued numerical example

modeling competitive bidding a critical essay in analyzing bidding modeling matters this paper is a critical analysis of the models available to aid competitive bidding decision making bidding strategy and auction design in real transactions after an introductory overview this paper describes the contexts in which auctions arise reviews the mainstream theory of single isolated auctions and discusses the important work involved in enrichment of this theory in doing so it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments the paper summarizes briefly what is known about the direct use of models by bidders and auction designers a general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making

a double sided multiunit combinatorial auction for substitutes theory and algorithms combinatorial exchanges have existed for a long time in securities markets in these auctions buyers and sellers can place orders on combinations or bundles of different securities these orders are conjunctive they are matched only if the full bundle is available on business to business b2b exchanges buyers have the choice to receive the same product with different attributes for instance the same product can be produced by different sellers a buyer indicates his preference by submitting a disjunctive order where he specifies the quantity he wants of each particular good and what limit price he is willing to pay for each good thus providing a subjective valuation of each attribute only the goods with the best prices will be traded this article considers a doubled sided multiunit combinatorial auction for substitutes that is a uniform price auction where buyers and sellers place both types of orders conjunctive and orders and disjunctive xor orders we show that linear competitive prices exist we also propose an algorithm to clear the market which is particularly efficient when the number of traders is large and the goods are divisible

reputation in an internet auction market i introduction without transmission of credible information asymmetries may lead to underproduction of goods or even market failure reputation mitigates inefficiencies associated with information asymmetries by providing an informative signal of quality 1 the difficulty in quantifying reputation means that few studies can analyze empirically the role of reputation in markets our analysis of a quantified market observed measure of reputation provides direct evidence of the effect of a seller s reputation on the terms of a onetime real world transaction thereby contributing empirical support to a fundamental economic principle this study empirically examines person to person transactions within the internet market known as ebay in this virtual market of unseen participants and products buyers and sellers face the risks of repudiation as the counter party may deny the agreement after the fact buyers assume risks associated with lack of seller integrity and asymmetric information about the particular product as the buyer is typically required to send payment before the seller ships the product in addition for many ebay transactions the cost of enforcing a contract is high relative to the transaction s value resulting in a practical absence of legal enforcement 2 by providing a history of trade execution information ebay benefits market participants by reducing information asymmetries while achieving substantial transaction cost economies market participants relate personal experiences which ebay uses to calculate a numerical reputation measure for each user market participants in turn can use this reputation measure to assess counter party risk and adjust bidding behavior accordingly in a sample of 460 auctions held between january 1998 and july 1998 we find a positive relation between prices and ebay s reputation measure higher reputation sellers experience higher auction prices ceteris paribus our findings suggest that repeat players are rewarded for building reputation consistent with the belief that the high reputation seller s value of future transactions outweighs the value of taking advantage of the buyer in the current transaction buyers are willing to pay more to a higher reputation seller this article contributes to the literature not only by providing quantitative support of long accepted reputation theories but also by illustrating the use of nontraditional markets as a natural laboratory for experiments this article is an example of how a newly formed electronic market can provide the elements necessary for analytical research we find that ebay transactions for this item exhibit characteristics similar to transactions in more conventional markets namely 1 prices are higher when there is less quantity supplied when fewer of the items are available the same day 2 prices are lower during periods of lower demand times less likely to have high traffic 3 sellers with higher shipping and handling costs receive lower prices and 4 sellers failing to provide information about shipping and handling fees i e larger information asymmetries receive fewer bids dramatic innovations in online market structure and increasing availability of online market data should enable researchers to examine directly other traditionally non quantifiable economic ideas this article is organized as follows section ii describes how reputation can be used to facilitate transactions in the presence of asymmetric information section iii describes the ebay market summarizes the listing and bidding processes and discusses the reputation mechanism for this market section iv presents the price and reputation descriptive statistics associated with a consistently auctioned item and reports the empirical findings of how this item s highest bid price varies with the level of the seller s reputation we conclude in section v with a discussion of ebay s continued attempts to add value to the market through recent structural changes

combinatorial auction design combinatorial auctions have two features that greatly affect their design computational complexity of winner determination and opportunities for cooperation among competitors dealing with these forces trade offs between desirable auction properties such as allocative efficiency revenue maximization low transaction costs fairness failure freeness and scalability computational complexity can be dealt with algorithmically by relegating the computational burden to bidders by maintaining fairness in the face of computational limitations by limiting biddable combinations and by limiting the use of combinatorial bids combinatorial auction designs include single round first price sealed bidding vickrey clarke groves vcg mechanisms uniform and market clearing price auctions and iterative combinatorial auctions combinatorial auction designs must deal with exposure problems threshold problems ways to keep the bidding moving at a reasonable pace avoiding and resolving ties and controlling complexity

buy prices in online auctions irrationality on the internet abstract buy prices are puzzling it makes sense for a seller at auction to set a minimum bidding level i e a reserve price surely but a maximum we explore the use of maximum bidding levels buy prices in online auctions and provide a rational explanation for this seemingly irrational auction mechanism we show that augmenting an english auction with a buy price can improve the seller s profits by partially insuring and therefore increasing the expected payment from some risk averse bidders perhaps more surprising is that the english auction augmented with a buy price can also be superior even to the first price sealed bid and dutch auctions when bidders are risk averse

a general equilibrium model of exchange market intervention with variable sterilization abstract the model presented in this paper is characterized by rational expectations sticky prices imperfect capital substitution separate policy functions for domestic credit and credit and reserves and variable sterilization monetary intervention and sterilization policies offer complex tradeoffs between internal and external objectives sterilization dampens exchange rate and price changes due to intervention but magnifies short run changes due to foreign interest rate shocks the ratio of exchange rate to price changes due to intervention rises at an increasing rate with the degree of sterilization and changes in domestic credit induce long run purchasingn power parity but exogeneous changes in reserves income or the foreign interest rate do not

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices