Designing bidding strategies in sequential auctions for risk averse agents: A theoretical and experimental investigation

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4 Citations (Scopus)

Abstract

Designing efficient bidding strategies for sequential auctions remains 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 increasing 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. We model the sequential bidding decision process as an MDP and we analyze, for a category of expectations of future price distributions, the effect that a bidder's risk aversion profile has on her decision-theoretic optimal bidding policy. This analysis is performed separately for the case of first-price and second-price sequential auctions.Next,we simulate the above strategies, and we study the effect that an agent's risk aversion has on the chances of winning the desired items. We conclude the paper with an experimental study of how the presence of risk-averse bidders in a market affects allocation efficiency and expected seller revenue.

Original languageEnglish
Title of host publicationAgent-Mediated Electronic Commerce and Trading Agent Design and Analysis - AAAI 2007 Workshop, TADA 2007, Selected and Revised Papers
PublisherSpringer
Pages76-89
Number of pages14
ISBN (Print)9783540887126
DOIs
Publication statusPublished - 2008
Externally publishedYes
Event5th Workshop on Trading Agent Design and Analysis, TADA 2007, Co-located with the 22nd AAAI Conference on Artificial Intelligence, AAAI 2007 - Vancouver, BC, Canada
Duration: 23 Jul 200723 Jul 2007

Publication series

NameLecture Notes in Business Information Processing
Volume13 LNBIP
ISSN (Print)1865-1348

Conference

Conference5th Workshop on Trading Agent Design and Analysis, TADA 2007, Co-located with the 22nd AAAI Conference on Artificial Intelligence, AAAI 2007
CountryCanada
CityVancouver, BC
Period23/07/0723/07/07

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