Thresholding at the monopoly price: an agnostic way to improve bidding strategies in revenue-maximizing auctions

We address the problem of improving bidders' strategies in prior-dependent revenue-maximizing auctions. We introduce a simple and generic method to design novel bidding strategies if the seller uses past bids to optimize her mechanism. This strategy works with general value distributions, with asymmetric bidders and for different revenue-maximizing mechanisms. Furthermore, it can be made robust to sample approximation errors on the seller part. This results in a large increase in utility for bidders whether they have a full or partial knowledge of their competitors. In the case where the buyer has no information about the competition, we propose a simple and agnostic strategy that is robust to mechanism changes and local (as opposed to global) optimization of e.g. reserve prices by the seller. In textbook-style examples, for instance with uniform value distributions and two bidders, this no-side-information and mechanism-independent strategy yields an enormous 57% increase in buyer utility for lazy second price auctions with no reserves. In the i.i.d symmetric case, we show existence and uniqueness of a Nash equilibrium in the class of strategy we consider for lazy second price auctions, as well as the corresponding explicit shading strategies. Our approach also works for Myerson auctions for instance. At this Nash equilibrium, buyer's utility is the same as in a second price auction with no reserve. Our approach also yields optimal solutions when buyer are constrained in the class of shading strategies they can use, a realistic constraint in practical applications. The heart of our approach is to see optimal auctions in practice as a Stackelberg game where the buyer is the leader, as he is the first one to move (here bid) when the seller is the follower as she has no prior information on the bidder

Speculation in Standard Auctions with Resale

In standard auctions with symmetric, independent private value bidders resale creates a role for a speculator—a bidder who is commonly known to have no use value for the good on sale. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions

On-demand or Spot? Selling the cloud to risk-averse customers

In Amazon EC2, cloud resources are sold through a combination of an on-demand market, in which customers buy resources at a fixed price, and a spot market, in which customers bid for an uncertain supply of excess resources. Standard market environments suggest that an optimal design uses just one type of market. We show the prevalence of a dual market system can be explained by heterogeneous risk attitudes of customers. In our stylized model, we consider unit demand risk-averse bidders. We show the model admits a unique equilibrium, with higher revenue and higher welfare than using only spot markets. Furthermore, as risk aversion increases, the usage of the on-demand market increases. We conclude that risk attitudes are an important factor in cloud resource allocation and should be incorporated into models of cloud markets.Comment: Appeared at WINE 201

First-price auctions with resale: the case of many bidders

If agents engage in resale, it changes bidding in the initial auction. Resale offers extra incentives for bidders with lower valuations to win the auction. However, if resale markets are not frictionless, then use values affect bidding incentives, and stronger bidders still win the initial auction more often than weaker ones. I consider a first price auction followed by a resale market with frictions, and con�rm the above statements. While intuitive, our results differ from the two bidder case of Hafalir and Krishna (2008): the two bidders win with equal probabilities regardless of their use values. The reason is that they face a common (resale) price at the relevant margin, a property that fails with more than two bidders. Numerical simulations show that asymmetry in winning probabilities increases in the number of bidders, and in large markets resale loses its e¤ect on allocations.auction, resale

Uniqueness of Equilibrium in Sealed High-Bid Auctions

Sealed High-Bid Auctions, Equilibrium

Auctioning Horizontally Differentiated Items

This paper analyses strategic market allocation by two auc- tioneers holding substitutes. It characterizes both the cooperative and com- petitive outcomes. Under cooperation or competition with close substitutes, bidders are allocated according to the expected total surplus each generates. This market division is efficient if and only if the distribution of bidders? tastes is not skewed. If skewed, reserve prices distort participation towards the least preferred item. For greater degrees of product differentiation compe- tition leads to multiple equilibria. Finally, competition with close substitutes sellers leave participation rents to their weakest bidder. They do not in other cases, whether they compete or cooperate.Competition, Auctions, Reserve prices, Efficiency

Affliation in Multi-Unit Auctions

We extend Milgrom and Weber’s affiliated valuations model to the multi-unit case with constant marginal valuations where 2 bidders compete for k identical objects. We show that the discriminatory auction has a unique equilibrium, that corresponds to Milgrom and Weber’s firstprice equilibrium. This unique equilibrium therefore leads to lower expected prices than the equilibrium of the English auction where the units are bundled together. Hence we show that in a common value auction of a single object where the object can be divided into k parts, it is not possible to increase revenue by using a multi-unit discriminatory auction. We discuss a possible application to Treasury auctions.Affiliated Valuations, Multi-Unit Auctions, Treasury Auctions.

Speculation in Standard Auctions with Resale

In standard auctions with symmetric, independent private value bidders resale creates a role for a speculator - a bidder who is commonly known to have no use value for the good on sale. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions.standard auctions, speculation, resale, efficiency