Bidding In Auctions Research Articles

Marketing Agencies and Collusive Bidding in Online Ad Auctions

The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the generalized second-price auction (GSP, used by Google, Microsoft Bing, and Yahoo!) and the Vickrey–Clarke–Groves (VCG) mechanism (used by Facebook). We find that despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction in terms of both revenues and efficiency. This paper was accepted by Gabriel Weintraub, revenue management and market analytics.

Pelaksanaan Lelang Terhadap Jaminan Hak Tanggungan Pada Perbankan (Studi Di Kantor Pelayanan Kekayaan Negara Dan Lelang (KPKNL) Kisaran)

Marketing (auction) is meant in the discussion of this thesis is auction of mortgage rights to land, in practice it is called auction of mortgage rights over land. Based on the fact, the objects being auctioned are land rights and apartment units as stated in the mortgage rights law and government regulations. That the objective of the auction of land rights and apartment units is carried out so that consumers can use and control the land legally according to the applicable law shall be the right of the auction winner. The mortgage auction is the sale of movable and immovable property publicly with a written or direct bid price, whether it increases or decreases in the attainment of the highest price before the auction announcement, so that the committee can close and determine the auction winner with the highest bid system from the guarantor rights auction participants. Based on the provisions of the auction implementation instructions contained in PERMENKEU number 27 / PMK.06 / 2016, the meaning of Auction is the offering of movable and immovable objects open to the public and the bidding system from the lowest to the highest bid from the auction participants, the auction bid will be closed after the auction winner the one with the highest bid value

Oracle-efficient Online Learning and Auction Design

We consider the design of computationally efficient online learning algorithms in an adversarial setting in which the learner has access to an offline optimization oracle. We present an algorithm called Generalized Follow-the-Perturbed-Leader and provide conditions under which it is oracle-efficient while achieving vanishing regret. Our results make significant progress on an open problem raised by Hazan and Koren [31], who showed that oracle-efficient algorithms do not exist in general [30] and asked whether one can identify properties under which oracle-efficient online learning may be possible. Our auction-design framework considers an auctioneer learning an optimal auction for a sequence of adversarially selected valuations with the goal of achieving revenue that is almost as good as the optimal auction in hindsight, among a class of auctions. We give oracle-efficient learning results for: (1) VCG auctions with bidder-specific reserves in single-parameter settings, (2) envy-free item pricing in multi-item auctions, and (3) s-level auctions of Morgenstern and Roughgarden [43] for single-item settings. The last result leads to an approximation of the overall optimal Myerson auction when bidders’ valuations are drawn according to a fast-mixing Markov process, extending prior work that only gave such guarantees for the i.i.d. setting. Finally, we derive various extensions, including: (1) oracle-efficient algorithms for the contextual learning setting in which the learner has access to side information (such as bidder demographics), (2) learning with approximate oracles such as those based on Maximal-in-Range algorithms, and (3) no-regret bidding in simultaneous auctions, resolving an open problem of Daskalakis and Syrgkanis [14].

Investment Incentives in Procurement Auctions

We investigate firms' incentives for cost reduction in the first price sealed bid auction, a format largely used for procurement. A central feature of the model is that we allow firms to be heterogeneous. Though private value first price auctions are not games with monotonic best responses, we find that for comparative statics purposes they behave like these games. In particular, firms will tend to underinvest in cost reduction because they anticpate fiercer ehad-on competition. Using the second price auction as a benchmark, we also find that the first price auction will elicit less investment from market participants. Moreover, both auction formats tend to favor investment by the current market leader and are therefore likely to reinforce asymmetries among market participants.

Measuring Competition in M&A Negotiations

This paper provides novel insights about competition among bidders during the whole takeover process, its effect on offered deal premiums, bidder announcement returns, and post-bid dynamics. Exploiting a representative sample of 780 public U.S. transactions, extended with comprehensive hand-collected data from SEC filings, I find that takeover premiums are higher, the higher pre-announcement competition among bidders is. I measure competition during the private sales process with a ratio that relates the number of bids submitted to the target to the number of signed confidentiality agreements with the target, the Proposals-to-CA-Ratio. A one-standard deviation increase of this ratio corresponds to a statistically and economically significant 5.99% increase of the deal initiation premium (Eaton, Liu, and Officer (2020)), 0.87% lower announcement returns for the winning bidder in auctions, a 130% increased probability of receiving a rival bid prior to closing, and a 44.5% increased probability of cancelling the originally announced deal (measured relative to the unconditional probability). The latter two results are more pronounced if the announcement returns of the acquirer are positive, suggesting that competing bidders are lured by potentially value-increasing deals. By applying Heckman (1979) two-stage selection models with instrumented regressors, I show that my results are robust to endogeneity concerns, especially to target’s decision to initiate the deal as well as the decision of the subsequent selling procedure (auction vs. one-to-one negotiation). The advantages of this competition measure are that (1) it relies on data as reported in target firm’s official merger documents filed with the SEC, which creates a strong incentive to report truthfully, and (2) it takes the evolution of bidding into account, controlling for the number of submitted bids. I conclude that competitive private negotiations stay competitive during the public phase of the deal, and that target boards fulfill their fiduciary duties by selecting the highest-bidding acquirer.

Competitive and risk-adequate auction bids for onshore wind projects in Germany

Abstract In recent years, auction mechanisms have gained in significance in the context of renewable energy deployment. An increasing number of countries have adopted auctions for the allocation of permits and financial support for renewable energy projects, thereby increasing competition among project developers. As a result, profit margins have decreased significantly while sensitivity to risks and uncertainty has increased. The adequate quantification of bid prices is a key challenge. We present a modeling approach to determine competitive and risk-adequate auction bids. The contribution of this paper is an improved method for quantifying marginal cost, which is the minimum sales price per unit of electricity through which the investment criteria of all project stakeholders are fulfilled. In our financial model, the risk-adequateness is determined through the investment criteria of equity investors by means of the adjusted present value, and those of debt investors by means of the debt service cover ratio, through Monte Carlo simulations. The resulting marginal cost serve as the starting point for strategic bidding optimization, regardless of the pricing rule in the contemplated auction design. To demonstrate the integrability of our mathematical model with strategic bidding optimization, we check its applicability in a case study, which shows how a German project developer should bid to realize an onshore wind farm project. We show that our model enables the quantification of bid prices that are both competitive and risk-adequate.

Jump bids in real estate auctions

The lion’s share of Norwegian homes changes hands through closely monitored and regulated auctions. Some housing market experts advocate the supremacy of a jump bid, a significant bid increase to discourage fellow bidders, and thereby acquire the dwelling at a lower price compared to bidding strategy with moderate bid increases. We find no evidence for the efficacy of this jump bid strategy. Jump bidders, if successful, pay a positive jump premium. This also applies to the case where the jump is not the final bid and the jump bidder win at a later stage. In this case, the jump bid premium is around 1 to 2%. However, a jump bid is a credible signal of “serious intentions”. Jump bidders tend to win auction more often even in cases, where the jump bid is matched, and the auction continues.

ONLINE AUCTION AS A MARKETING TOOL OF USED CAR SALES STIMULATION

The article explores the essence of online auction as an environment for the promotion of goods through e-commerce technology, which is rapidly developing and changing. The aim of the article is to study theoretical issues related to the identification of the peculiarities of online auctions functioning to stimulate sales of used cars. The processes occurring in the e-commerce environment are the object of research. The basic principles of the formation of a business model of an online auction are determined, the main types of auctions are considered, namely: standard, Dutch, simultaneous bid auction, auction of closed bid and double auction. The advantages and disadvantages of online auctions during the bidding process are disclosed. The groups of auctions in Ukraine are determined. The process of selling used cars at the auction is investigated and its main stages are described. Based on the experience of the specialized international company "ALD Automotive Ukraine", the activities of an online auction for the sale of used cars are analyzed in the article. The strengths and the weaknesses of using online auctions to drive sales of used cars have been identified. The strengths are the following: the access to complete information, the availability of the most powerful tools for selecting a vehicle according to technical specifications, cost reduction related to the advertising campaign, full automation of the process of servicing potential customers, the support of customer feedback, quick informing of the partners and customers about new services, the lack of corruption schemes, after-sales support and resolving contentious issues, etc. The weaknesses are the following: frequent lack of opportunity for the buyer to inspect the car personally, possible long-term delivery of goods, etc.

Optimal generator side bidding with carbon emission trading and risk management

Global warming is one of the most alarming phenomena facing our planet today. There is a consensus among scientists that human-induced greenhouse gases (GHGs) should be regulated to slow down the heating of the Earth’s oceans and atmosphere. Energy consumption and CO2 emissions are continuously increasing in different countries, especially developing ones such as India, whose emerging economy and rapid economic development has caught the attention of the world. CO2 emission trading is executed by the various developed countries to alleviate the affect of GHG emissions. In this work, an optimal bidding strategy for a supplier has been developed, considering rival’s bidding behavior, in an hourly day-ahead pool market. Bidding problem has been formulated as a bi-level multi objective optimization problem (BLMOOP), where in the first level generator submit bid strategically to the ISO and in the next level a particle swarm optimization (PSO) approach has been employed for the maximization of social welfare with risk management. It is assumed that each generator should submit bid in sealed auction based on pay-as-bid MCP (market clearing price) mechanism with knowing the rival’s bidding behavior. The practicability of proposed optimization method is examined by an IEEE-30 bus system which consists of six suppliers.

The impact of strategic jump bidding in residential English auctions

ABSTRACT In the Norwegian real estate market, used dwellings are normally sold through an auction process similar to the standard English (open ascending-bid) auction. Using survey results (N = 1,803), we define jump bids and investigate the motivations behind the use of such strategies. We find that most bidders tend to consider intimidation and signalling as the main motivations for applying a jump-bidding strategy, and intimidation strategies applied by competing bidders appear to be an important reason for bidders withdrawing early from an auction. We also use a sample of 1,142 auction journals and find that, on average, auctions containing jump bids achieve 2.8–9.3 percent higher price premiums compared to strictly straightforward-bidding auctions. The premium is higher when the intimidation strategy fails and competing bidders counter with jump bids. Additionally, this paper provides evidence that jump bids are usually placed at the earliest stage of the auction and have a stronger intimidation effect the earlier they are placed, despite having an overall positive effect on the premium. The results are robust to different valuation approaches and omitted variable bias controls. Our findings have important implications for sellers and buyers in auction settings, and for regulators of auction processes.

Value-Rationalizability in Auction Bidding

In a symmetric first-price or second-price auction, a bidding strategy is characterized as value-rationalizable if it can be viewed as being realized at a Nash equilibrium under the specification of a non-negative and increasing value function. In an environment where the underlying probabilistic framework is common knowledge, we investigate conditions for value-rationalizability by examining the value functions, which are induced by a bidding strategy. The existence of value-rationalizable strategies with infinite large induced functions is established. We argue that an improper specification of the value function should be attributed to bounded rationality. We show that, under assumptions, strategies which are not value-rationalizable are sub-optimal responses. Finally, the degree of irrationality is assessed by measuring the deviation of the induced function from being a proper value function in terms of its sign and monotonicity. The findings are illustrated by different examples in the independent private value paradigm and the interdependent value setting.

A Volatility Index for Bilateral Electricity Contracting Auctions

The use of electricity auctions in daily and intraday trading is one of the most common means of trading on electricity exchanges. Auctions are carried out aiming to reach a marginal price that will be charged for all agents involved. The identification of appropriate moments for placing bids interests consumers and generators, as negotiated demand is directly related to the marginal price established at the end of each auction. In the stock market several indexes assist investors in decision making on operations. However, energy auctions still lack this type of tool. In this context, this paper presents an index proposal based on aggregate supply and demand curves. Machine learning models and time series statistics are employed to predict bid value volatility trends. The experiments used real data from a 958 bid auction promoted by the Iberian Energy Market Operator (Operador del Mercado Ibérico de Energia, OMIE), the stock exchange responsible for the spot market in Spain and Portugal. Based on the results, it was possible to identify moments in which the parties involved in the auction chose to compromise on bid values with specification of the magnitude of these concessions.

Are Strategies Anchored?

Anchoring is one of the most studied and robust behavioral biases, but there is little knowledge about its persistence and magnitude in economic settings. This article studies the role of anchoring bias in strategic interactions. We test experimentally two different anchor types using auctions. The announcement of a random group identification number but also of an upper bid limit, despite being irrelevant for a rational player, result in higher bids in first-price sealed-bid auctions. In Dutch auctions, the effect of the bid limit is negative. Based on these results we demonstrate that the long-established ranking that the Dutch auction generates lower revenue than the first-price sealed-bid auction crucially depends on the size of the anchor. The observed adjustment behavior can be explained as a rational response to anchored biased beliefs.

Nonparametric identification of an interdependent value model with buyer covariates from first-price auction bids

This paper introduces a version of the interdependent value model of Milgrom and Weber (1982), where the signals are given by an index gathering signal shifters observed by the econometrician and private ones specific to each bidders. The model primitives are shown to be nonparametrically identified from first-price auction bids under a testable mild rank condition. Identification holds for all possible signal values. This allows to consider a wide range of counterfactuals where this is important, as expected revenue in second-price auction. An estimation procedure is briefly discussed.

Preemptive bidding in common value takeover auctions: Social surplus and the target’s revenue

This paper develops a model of preemptive jump bidding in common value takeover auctions. It shows that, in a case of common values, jump bidding increases the social surplus and, under certain conditions, can lead to a higher expected target’s revenue. It also demonstrates that an increase in investigation costs may improve social efficiency even if it leads to larger direct social costs. Based on the results, the paper provides several implications related to legal fees and the length of the takeover contest.

Expectations-Based Loss Aversion in Auctions with Interdependent Values: Extensive vs. Intensive Risk

We analyze the bidding behavior of expectations-based loss-averse bidders in auctions with interdependent values. We emphasize the difference between the risk bidders face over whether they win the auction (extensive risk) and the risk they face over the value of the prize conditional on winning (intensive risk). The extensive risk creates an “attachment” effect, whereas the intensive risk operates via a “comparison” effect. How loss-averse bidders react to these different risks depends on whether they incorporate their bid into their reference point. Under “unacclimating personal equilibrium” (UPE), where bidders keep their expectations fixed when choosing their bids, both the extensive and intensive risks induce them to bid more aggressively. Moreover, bidders are exposed to the “winner’s curse” and a seller can attain higher revenue by hiding information in order to leverage the intensive risk. By contrast, under “choice-acclimating personal equilibrium” (CPE), where a bid determines both the reference lottery and the outcome lottery, the intensive risk creates a “precautionary bidding” effect that pushes bidders to behave less aggressively; whether this effect is reinforced or undermined by the extensive risk depends on a bidder’s likelihood of winning the auction. Furthermore, bidders are less aggressive than under UPE and can be subject to a “loser’s curse.” Yet, by committing to bidding less aggressively, such as by engaging in proxy bidding, loss-averse bidders are better off under CPE than UPE. This paper was accepted by Ilia Tsetlin, decision analysis.

Are SEO investors misled by analyst optimism bias? Evidence from investor bids in SEO auctions

Using unique seasoned equity offering (SEO) investor bid data in China, we examine the impact of analyst optimism bias on SEO investors’ bids and the subsequent SEO discount. After accounting for information asymmetry and analyst coverage, our findings suggest that SEO investor bid prices are positively correlated with analyst optimism bias, suggesting that SEO investors are misled. The higher SEO bid price translates into a lower SEO discount. Our findings are robust to alternative measures of earnings forecasts, additional control variables, and SEO discounts. Additional evidence suggests that, when institutional investor ownership is lower or an SEO firm is less transparent, the positive correlation is more prominent. At last, we find the long-run SEO performance is negatively correlated with the analyst optimism bias. Our findings imply that analysts play more than one role in SEO pricing. In addition to lowering information asymmetry, analysts also mislead SEO investors by providing optimistically biased earnings forecasts.

The Winner's Curse in Dynamic Forecasting of Auction Data: Empirical Evidence from eBay

Problem definition: Dynamic forecasting models in auctions have fallen short on two dimensions: (i) the lack of an equilibrium model for final stage bids and (ii) the lack of a winner's curse (i.e., a tendency to overpay conditional on winning the auction) adjustment to allow bidders to account for a common value component in the auction item. In this paper, we develop a methodology to accurately predict final stage bids from the initial bidding dynamics and quantify the impact of the winner's curse. This methodology allows us to conduct policy simulations to optimize auction design parameters. Methodology: Dynamic auctions typically have a stage of high exploratory activity, followed by an inactivity period, and then a final stage of last-minute bids with sharp jumps. With a Kalman filter approach, we use exploratory stage bids to predict an auction item's valuation distribution. We feed this prediction into an equilibrium model and apply item-specific adjustments for winner's curse, bidder heterogeneity, and inactivity period. We use the resulting equilibrium model to predict the final stage bids. Results: Our methodology improves the forecast of final stage bids by 15.84%, on average, compared to a state-of-the-art benchmark. This improvement is even higher (22.44%) for common value auctions. We also find that: (i) significantly more (resp., fewer) bidders internalize the winner's curse in common value (resp., private value) auctions, (ii) bidders in common value (resp., private value) auctions decrease their bids by 6.69% (resp., 3.51%) due to the winner's curse, and (iii) the inactivity period has a lesser impact on the final stage bids in private value auctions. Managerial Implications: Our proposed methodology is intended to facilitate the need in academia and practice for real-time bid predictions that encompass different levels of the common value component in auctions. Using our methodology, auction platforms can support their choice of minimum bid increment policies and decide how to allocate resources across different auctions to mitigate the adverse effects of the winner's curse.

Use of auctions to assess consumer value for fresh and end-of-code milk

The objective of this study was to survey consumers' milk purchasing behavior and investigate the effect of sensory experiences and an educational message on the perceived value of fluid milk at the beginning and near the end of code. Eleven auction sessions were carried out (n = 100 consumers), which included an explanation of the experiment, a survey about demographics and milk purchasing and consumption, sensory evaluation, an educational message, and 3 rounds of nth price auctions. Consumers were blindly served 2 pairs of milk samples from white-pigmented high-density polyethylene [2% and skim milk within 2 to 3 d of production (fresh) and 2% and skim milk with 2 to 3 d until the end of code (near-end)], and asked to indicate their preference and the level of acceptability for each sample using a 7-point hedonic scale. All samples were simultaneously evaluated by a panel of 8 judges who were trained to evaluate milk quality attributes on a 15 cm unstructured line scale. Results from the consumer panel acceptability rating session, trained panel descriptive analysis, and consumer auction bids were analyzed using multivariate factor analysis of variance. Subjecting pre- and post-survey responses to k means cluster analysis revealed 4 bidding populations in each round. Most participants (82%) indicated that they check the code date on milk every time they shop; 77% said they reached for the code date that was farthest out every time. However, on blind tasting, consumers did not prefer fresh over near-end milk. These findings were in agreement with their acceptability scores for fresh 2% (5.0/7.0), near-end 2% (5.2/7.0), fresh skim (4.5/7.0), and near-end skim (4.6/7.0) milks. Trained panelists did not detect a difference in "lacks freshness" flavor in fresh skim (1.9 cm/15.0 cm) or near-end skim milk (1.3 cm). Surprisingly, trained panelists did detect higher "lacks freshness" flavor in 1 lot of fresh 2% (2.3 cm) compared with near-end 2% milk (0.3 cm). When consumers bid on half gallons of milk with visible code dates, fresh skim was valued $0.27 higher than near-end skim, and fresh 2% was valued $0.29 higher than near-end 2%. After blind sensory evaluation, the margin between the fresh and near-end bids decreased to almost zero (fresh skim was valued only $0.03 more than near-end skim; near-end 2% was valued $0.01 more than fresh 2%). After the educational message about the meaning of code dates, consumer bids for near-end ($0.63) and fresh milk ($0.81) decreased compared with the first round of bidding ($0.74 and $1.01, respectively). Additionally, the margin in bids for fresh milk remained numerically higher than those for near-end milk ($0.15 for 2% and $0.21 for skim). The educational message about code date did not have the intended result of increasing consumer value for milk. Although consumers go out of their way to buy the freshest milk, they cannot necessarily distinguish fresh milk from milk at the end of code; consumers appear to value a code date that was farther out more than superior taste, even after a sensory experience and educational message.

Effects of experience, choice architecture, and cognitive reflection in strategyproof mechanisms

We study how performance in strategyproof mechanisms is affected by experience with the decision environment, choice architecture (selection among strategically equivalent mechanisms), and cognitive reflection. In both individual and strategic decisions, we observe substantial gaps in performance between high reflective and low reflective participants. We also find that choice architecture and experience narrow these gaps in performance. Our primary finding is that experience serves as a substitute for cognitive reflection: Across a series of experiments employing multiple rounds of a lottery task, a second price sealed bid auction, an English clock auction, and a random serial dictatorship allocation mechanism, we consistently find that the performance of low reflection participants with experience is similar to that of high reflection participants without experience. For the mechanisms we study, we also find that switching from a strategyproof to an ‘obviously strategyproof’ mechanism generally has a larger effect on performance than experience.