Abstract
Orientation: This article is related to Finances and Optimisation. The auctioneer designs every auction mechanism such that utility is maximised and cost is minimised. Research purpose: This article proposes an optimal auction mechanism through which auctioneers can assign fairly and efficiently assets to the highest bidders and maximise utility and/or minimise cost. Motivation for the study: One of the tasks of my PhD was about spectrum auction from which I got a vision to design mathematical models and related computational simulations for any asset underlying an auction. Research approach/design and method: Firstly, a study was conducted to model the way auctioneers could analyse and estimate bidders’ (buyers’) valuations, and then, accordingly, set the prices of the underlying assets or services. An open ascending-bid auction mechanism was also considered. Finally, a first-price sealed-bid auction mechanism for utility maximisation and cost minimisation is investigated. Main findings: The substantive contribution of this article is in the set of mathematical models and computational simulations designed and proposed for the bidders’ valuations and the considered open ascending-bid auction. For the investigated first-price sealed-bid auction mathematical models are developed in terms of a combinatorial optimisation problem. The formula computing the expected utility for the auctioneer was designed. Practical/managerial implications: The research provides rigorous ways for optimal auction design to auctioneers and any financial operators or managers. Contribution/value-add: The contributions are in the set of mathematical models and computational simulations. This article models the optimal auction design strategy mechanism as a combinatorial optimisation problem.
Highlights
Main findings: The substantive contribution of this article is in the set of mathematical models and computational simulations designed and proposed for the bidders’ valuations and the considered open ascending-bid auction
By reconsidering the open ascending-bid auction in Figure 1, we have the following reality: once bidder i gets involved in the auction, for example in an open ascendingbid auction or an open descending-bid auction, his plan is https://www.jefjournal.org.za influenced by the way the other N – 1 bidders emulate him to optimally value the considered asset and win, and by bidder i’s willingness to win
Bids’ mathematical models and computational simulations were provided to show the effectiveness of the approach
Summary
Modelling and computational simulation of optimal auction design and bidding strategies Research purpose: This article proposes an optimal auction mechanism through which auctioneers can assign fairly and efficiently assets to the highest bidders and maximise utility and/or minimise cost.
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