Effects of a Rationing Rule on the Ausubel Auction: A Genetic Algorithm Implementation

Abstract

The increasing use of auctions as a selling mechanism has led to a growing interest in the subject. Thus both auction theory and experimental examinations of these theories are being developed. A recent method used for carrying out examinations on auctions has been the design of computational simulations. The aim of this article is to develop a genetic algorithm to find automatically a bidder optimal strategy while the other players are always bidding sincerely. To this end a specific dynamic multiunit auction has been selected: the Ausubel auction, with private values, dropout information, and with several rationing rules implemented. The method provides the bidding strategy (defined as the action to be taken under different auction conditions) that maximizes the bidder's payoff. The algorithm is tested under several experimental environments that differ in the elasticity of their demand curves, number of bidders and quantity of lots auctioned. The results suggest that the approach leads to strategies that outperform sincere bidding when rationing is needed.

Exploring pricing rules in combinatorial sealed-bid auctions

“…Then, the fitness function evaluated the average revenue of the given auction with respect to a population of traders using that strategy. Similarly, Cliff (2003) extended his line of research on evolving trading strategies and auction rules to evaluate aggregate market performance, and Saez et al (2007) used independent parallel GAs to study the outcome of Ausubel auctions with different rationing rules. Finally, the use of GAs for analyzing the clock-proxy auction is covered in Mochon et al (2011).…”

Born to trade: A genetically evolved keyword bidder for sponsored search

“…[11], [13], [14]), to the best of our knowledge, we are the first to propose the use of evolutionary computation techniques to keyword bidding for sponsored search. The rapid growth in the online advertising industry and its relationship with search engines is attracting a growing research interest in the topic of online keyword based ad auctions, particularly towards per-click pricing rather than per-impression strategies [5].…”

The Clock Proxy Auction for Allocating Radio Spectrum Licenses

“…Moreover, GAs have been used in scientific literature devoted to auctions. Some examples are Andreoni and Miller (1995), Dawid (1999), Numnonda and Annakkage (1999), Wen and David (2001), Jennings (2002, 2003), Cliff (2003), Saez et al (2007) and Sun and Vora (2009). Essentially, a GA is an iterative procedure that maintains a population of structures that are candidate solutions for specific domain challenges.…”