Bid Increment Research Articles

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 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 equilibrium 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/Results: Dynamic auctions typically have a stage of high exploratory activity, followed by an inactivity period, and then an equilibrium 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 equilibrium stage bids. Our methodology improves the forecast of equilibrium stage bids by 11.33%, on average, compared with a state-of-the-art benchmark. This improvement is even higher (18.99%) for common value auctions. We also find that (i) significantly more (respectively, fewer) bidders internalize the winner’s curse in common value (respectively, private value) auctions; (ii) bidders in common value auctions decrease their bids by 6.03% because of the winner’s curse; and (iii) the inactivity period has a lesser impact on the equilibrium 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. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.1165 .

RTID-04. A RANDOMIZED PHASE II TRIAL TO COMPARE THE EFFICACY OF STANDARD VERSUS COMBINATION THERAPY (PERAMPANEL, MEMANTINE PLUS STANDARD) IN THE TREATMENT OF PATIENTS WITH NEWLY DIAGNOSED GBM-A STUDY DESIGN

Abstract BACKGROUND Glioblastoma (GBM) is the most aggressive malignant brain tumor in adults with poor prognosis. Effective treatment is urgently needed. Recent studies demonstrated neurogliomal synaptic communication through AMPA and NMDA receptors promotes glioma invasion and progression in vitro and in vivo. Therefore, dual blocking AMPA and NMDA receptor therapy is a potential enhancing strategy to prevent and to treat GBM progression given the two blockers act through different anti-glioma mechanisms. OBJECTIVE/HYPOTHESIS We hypothesize that adding AMPA blocker Perampanel (An anti-seizure medication) and NMDA blocker Memantine (An anti-dementia medication) to standard temozolomide plus radiation therapy (Stupp’s regimen) for the treatment of newly diagnosed GBM may prevent tumor progression. It may also reduce the frequency of onset/recurrence of seizure episodes and possibly improve radiation related cognition impairment. STUDY DESIGN This is a randomized, active controlled, open label, two arm phase II study of efficacy of treatment of GBM with combination therapy (dual AMPA and NMDA receptor blockers plus standard therapy) versus standard therapy. In the combination therapy arm, patients take Perampanel 2 mg daily and Memantine 5 mg bid, starting from -14 days to +14 days from initiation of concurrent chemo-radiation therapy. Titrating up at a 2 mg increment for Perampanel and 5 mg bid increment for Memantine until reaching MTD. If the patient has AE >= grade 2, then reduce doses at a decrement of 2 mg for Perampanel and decrement of 5 mg bid for Memantine. In the standard therapy arm, the patients are treated with Stupp’s regimen. PRIMARY AND SECONDARY ENDPOINTS PFS, 12, 24 month survival rates and response duration. Safety will be assessed by CTCAE V5. We will use Kaplan-Meier estimates for survival data and a stratified log-rank test for the randomization strata.

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.

An Ascending Auction for Freight Forwarder Collaboration in Capacity Sharing

In the highly competitive transportation market, small freight forwarders can form an alliance to secure capacity in advance and then share the capacity to fulfill their shipping requests during the freight season. Because not all the requests can be accepted, the rejected requests can be outsourced to the spot market typically at low profit margins. The forwarders are self-interested and have private information on the revenues and outsourcing profit margins of their requests. The centralized capacity-allocation problem is NP-hard, and its optimal solution may erode the profits of some forwarders. We propose an ascending auction mechanism to achieve truthful and approximately optimal capacity sharing. At each iteration of the auction, the set of bundles of capacity for each request is updated. The mechanism then determines a provisional capacity allocation and updates dual prices. Each request is allocated with a convex combination of bundles because a continuous capacity resource is considered. Strategy-proofness is ensured because all the winning bundles for an accepted request have the same payment, and the payment is ascending during the iterations. The mechanism iteratively expands the set of bundles and approximates the revenue loss to search optimal allocations, using the dual solution derived from minimizing primal-dual slackness. Social welfare is significantly improved compared with the no-collaboration case. We prove that the mechanism is strategy-proof, individually rational, weakly budget balanced, and finitely convergent. Extensive computational experiments show that the mechanism has efficiency loss less than 3% and budget surplus less than 10% in most cases. To achieve high system efficiency and small budget surplus with a reasonable computational time, it is better to select an appropriately small bid increment, especially for large-scale problems.

An analysis of auction strategies in apartment sales

PurposeThis paper aims to empirically test the effect of list price and bidding strategies in ascending auctions of residential real estate.Design/methodology/approachThree regression models are estimated, using a unique data set from 629 condominium apartments in the inner-city of Stockholm, Sweden, sold between January 2010 and December 2011.FindingsThe results show that jump bidding has the predicted effect of reducing competition by scaring off bidders. However, a higher average bid increment leads to a higher selling price. Furthermore, results show that a fast auction in terms of average time between bids acts to increase the probability of so-called auction fever as both the number of bidders and the selling price are positively correlated with the speed of the auction. While the average behavior of all auction participants, in terms of jump bidding and time between bids, significantly affects auction outcomes, differences in strategies applied by winners and losers show mixed results. The results of this study with respect to sellers’ list price strategy show that underpricing is an ineffective strategy in terms of enticing more bidders to participate in the auction. Furthermore, underpricing is not sufficient to have a positive effect on the selling price.Originality/valueThis paper is one of the first papers to empirically analyze how different bidding strategies affect the outcome of residential real estate auctions in terms of competition and the final selling price.

Bid Increment Adjusting Strategies in English Auction-based Sponsored Search

English auctions are applied in many current e-commerce applications because of the easy implementation. Some sponsored search advertising (SSA) services consider the ascending bidding rules of English auctions to determine winners. However, the high computation cost of determining winners is the major drawback of the English auction-based SSAs. Because the SSA is an online service, Internet users do not wait for a long time to receive the searc h result pages. In this paper, we provide a mechanism to reduce the overhead of computing winners and maximize the revenue obtained by the search engine provider (SEP). Our proposed mechanism adopts the minimum increase price (MIP), which is similar to the central price in the English auction, to indicate how much should be raised for the bids with updated prices. We design a uniform MIP adjusting strategy and an adaptive MIP adjusting strategy to determine the MIP setting in each round. We analyze the convergent speed of two proposed MIP adjusting strategies. According to our simulation results, we conclude the following properties. For all the SEP revenue considerations, the adaptive MIP adjusting strategy is outstanding in popular keywords, and rare keywords for the uniform MIP adjusting strategy. Opposite results are obtained for the convergent speed.

The Bidding Strategy Research of Radio Spectrum User Auction Based on the Partial Distribution

In the spectrum auction, bidding strategy of telecommunication operation enterprise is very important. Considing the telecommunication operation enterprise how to choose the optimal bidding strategy as the train of thought. According to the spectrum of value distribution characteristics to the enterprise, using incomplete information static game theory to construct the operating enterprise bidding game model based on the partial distribution, and obtained model’s Nash equilibrium through the simulation with numerical solutions of the form. At the same time, the equilibrium analysis found: enterprise’s valuation central tendency or fluctuation can positive motivate its equilibrium bid; Along with the enterprise central tendency of valuation and fluctuation amplitude of valuation increasing ceaselessly, increasing unit valuation incentive equilibrium bid increment continuously increase.

Effects of Minimum Bid Increment in Internet Auctions: Evidence from a Field Experiment

I study the role of minimum bid increments (MBI) in internet auctions using field experiment data. I sell identical gift cards while varying the MBI. Internet auctions have typically been viewed as second-price, implying truthful bidding. However, due to the presence of the MBI, equilibrium bidding behavior involves bid-shading. I test between truthful bidding and equilibrium bidding. Truthful bidding is rejected. Bidders conduct bid-shading in a pattern consistent with equilibrium bidding. I also report that the revenue maximizing level for the MBI is higher than zero and the eBay level is close to optimal. Moreover, a high MBI inefficiently limits entry.

Procurement decision making mechanism of divisible goods based on multi-attribute auction

Multi-attribute auction enables negotiation on several attributes in addition to the price such as quality, quantity, time of delivery and service levels. Most of the existing multi-attribute auction mechanisms are designed by considering a unique good or indivisible multiple goods. This paper focuses on designing a multi-attribute auction mechanism for addressing the decision making problem of multi-attribute and multi-source procurement of a kind of homogeneous continuous divisible goods (such as coal, oil, electricity and gas). The suppliers’ optimal bidding strategies are discussed, and a bidding method named the minimum bid increment method is proposed to simulate the overall process of suppliers’ multiple rounds of bidding. Theoretical analysis shows that our auction mechanism is an efficient mechanism, and satisfies the incentive compatibility conditions and the individual rationality conditions. Moreover, a multi-attribute auction example about the steam coal procurement is given to show how to implement our multi-attribute auction mechanism.

Bidding Strategies and Consumer Savings in NYOP Auctions

We investigate how bidding strategies of successful bidders influence the savings they derive from a Name Your Own Price (NYOP) retailer relative to buying the same product from a retailer who posts prices. Utilizing bidding data for hotel room purchases we demonstrate that consumer savings rate depends positively on consumer decision to haggle (# bids ≥3) and on the shape of the bid function. Relative to non-hagglers (# bids ≤2), hagglers who employ a constant bid increment (i.e., a linear) strategy and a decreasing bid increment (i.e., concave) strategy save more, while those who employ an increasing bid increment strategy (i.e., convex) fare no better. A post hoc analysis also shows that hagglers place many bids in the pursuit of higher quality products, while non-hagglers save friction costs by sacrificing quality (e.g., targeting lower star hotels and adjusting the days of travel).

The effects of proxy bidding and minimum bid increments within eBay auctions

We present a mathematical model of the eBay auction protocol and perform a detailed analysis of the effects that the eBay proxy bidding system and the minimum bid increment have on the auction properties. We first consider the revenue of the auction, and we show analytically that when two bidders with independent private valuations use the eBay proxy bidding system there exists an optimal value for the minimum bid increment at which the auctioneer's revenue is maximized. We then consider the sequential way in which bids are placed within the auction, and we show analytically that independent of assumptions regarding the bidders' valuation distribution or bidding strategy the number of visible bids placed is related to the logarithm of the number of potential bidders. Thus, in many cases, it is only a minority of the potential bidders that are able to submit bids and are visible in the auction bid history (despite the fact that the other hidden bidders are still effectively competing for the item). Furthermore, we show through simulation that the minimum bid increment also introduces an inefficiency to the auction, whereby a bidder who enters the auction late may find that its valuation is insufficient to allow them to advance the current bid by the minimum bid increment despite them actually having the highest valuation for the item. Finally, we use these results to consider appropriate strategies for bidders within real world eBay auctions. We show that while last-minute bidding (sniping) is an effective strategy against bidders engaging in incremental bidding (and against those with common values), in general, delaying bidding is disadvantageous even if delayed bids are sure to be received before the auction closes. Thus, when several bidders submit last-minute bids, we show that rather than seeking to bid as late as possible, a bidder should try to be the first sniper to bid (i.e., it should “snipe before the snipers”).

Impact of ending rules in online auctions: The case of Yahoo.com

This paper examines the impact of sellers' choice of auction parameters on the level of their revenues using data from Yahoo.com's Playstation 2 system auctions. Our study specifically highlights the impact of the ending rule. We introduce a new variable called Winning Bid Ratio (WBR), and use it as a proxy for seller revenues. WBR is the ratio of the winning bid of an auction to the buy price offered by the seller. We find that choosing a high bid increment and including a shipping price decreases the WBR. Alternatively, lower number of bids and choosing a shorter auction length have a positive effect on the WBR. On the whole, the ending rule has a negative effect on the WBR, which is in accord with the theoretical predictions in the literature. However, we also find variations in the results for the effect of ending rule when we divide the data into two groups consisting of high and low-value auctions.

Maximizing sellers’ welfare in online auction by simulating bidders’ proxy bidding agents

Abstract This paper presents an agent-based simulation model to estimate the effects of auction parameters on the auction outcomes, and to find an optimal or, at least, a near-optimal infrastructure. In particular, this study intends to study how bidders’ personalities and bidding strategies with other auction parameters affect the closing prices in two auction mechanisms: English and Yankee auction. Experimental results show that the aggregated outcome of multiple English auctions is more favorable to auctioneers and sellers than that of a corresponding single Yankee auction. It is also shown that raising minimum bid increment or bid starting price positively affects the closing prices in both auction types. However, two auction systems respond differently to the changes in parameter values in terms of magnitude and robustness. Further, it is noted that the closing price of an auction is negatively related to the proportion of risk-takers who adopt sniping strategy to submit their bids. As the proportion of risk-takers increases, the closing price significantly decreases in hard-ending auctions (eBay-like system), but only marginally in soft-ending auctions (Amazon-like system). In particular, soft-ending auctions with less snipers and a longer time window of automatic extension return the most favorable closing price to sellers.

THE ROLE OF THE BIDDING PROCESS IN PRICE DETERMINATION: JUMP BIDDING IN SEQUENTIAL ENGLISH AUCTIONS

This paper uses data collected from a series of public auctions of used cars in New Jersey to examine how strategic bidding affects price determination in open-outcry English auctions. “Jumps” in the bidding, which occur when a new offer exceeds the old offer by more than the minimum bid increment, are highly pervasive and consistently related to the item’s presale estimated price. The size of the jumps is not affected by the selling order, however. This jump bidding pattern suggests that open-outcry auctions are more appropriately interpreted with models that assume common-item valuations rather than models assuming private valuations. (JEL D44)

Simultaneous Independent Online Auctions with Discrete Bid Increments

Decentralized multi-item auctions offer great opportunities for integrating fragmented online auction markets into larger markets with more efficient outcomes. This paper extends the theory of multi-item ascending auctions of substitutes by considering any finite positive bid increment and allowing the bidders to bid asyn-chronously instead of bidding in a round-robin fashion. We consider a setup where the bidders' utilities over multiple items are additive and bound the maximum inefficiency in the allocation when the bidders follow a simple greedy strategy. We also obtain the limits within which the prices of individual items can vary from one outcome to another. For the special case of single unit bidder demand, we also bound the maximum surplus which a bidder can extract by unilaterally switching to some other strategy. The paper suggests an upper bound for the minimum required bid increment which would be necessary for competitive price discovery and truthful bidding in a practical online implementation.

The Role of the Bidding Process in Price Determination: Jump Bidding in Sequential English Auctions

I study the sequence of bidding in an open-outcry English auction to examine how the strategic bidding process affects price determination. I do this by studying the anomalous nature of jump bidding in data I have collected from a series of public auctions of used cars in New Jersey. Jump bidding occur when a new offer is submitted that is above the old offer plus the minimum bid increment permitted. I find that jump biddings are an empirical regularity in all items sold. The jumps are a function of the presale estimate of the item's price but are not affected by the selling order. I suggest a way to use the Jump Biddings to determine whether an open-outcry auction is best interpreted with models that assume private- or common-item valuations, and conclude that these auctions are consistent with the common values interpretation.

Nine objections to Steiner and Wolff on land disputes

In the July 2003 Analysis, Hillel Steiner and Jonathan Wolff (2003) propose a framework for “resolving disputed land claims between competing nations or ethnic groups.” The idea is that we should auction off the land, with the loser of the auction getting the money. While this might mean that the richer party will normally end up with the land, and this is normally not thought to be a good thing, if the auction is conducted as they specify “it will turn out that the other party ends up with something which, in the circumstances, it prefers to the land: lots of money.” Actually, it isn’t so clear that this is what will result. Let’s say we have a particular parcel of land that groups A and B want. They each want it quite strongly, but B has deeper pockets than A, so while A would be prepared to pay 8 for the land, B would be prepared to pay 12. For the auction process to function, there must be a minimum bid increment, I’ll say it is 2 . Assume that B has just bid 4, A must now choose whether to bid 4 2 or accept B’s bid. And assume for now that A is not bidding tactically, it only makes a bid if it would prefer to win the auction with that bid than accept B’s bid. This assumption will be relaxed below. So for now, A must decide whether it prefers to be given 4, or to get the land for 4 2 . Since it values the land at 8, and since it will give up 8 1 2 to buy the land (the 4 1 2 it will pay, plus the 4 it would have received from B) it may well decide to just accept the bid. But now it has ended up with something it definitely does not prefer to the land, since it just accepted a bid for 4. There are two assumptions at play here. One is that A doesn’t bid tactically, which I shall return to a bit. The other is that how much A will pay for the land is not affected by receiving B’s 4. That is, I assume that the marginal utility of money is relatively constant for A over the ranges of money at play in the auction. This assumption might be false if we’re dealing with a very large or valuable body of land, but it’s not unreasonable in most circumstances. (Space prevents a complete study of what happens if we take the declining marginal utility of money completely into account. Roughly, the effect is that some of my criticisms are slightly vitiated.) Now while these assumptions might be false, Steiner and Wolff give us no reason to be certain they are false. So for all they’ve said we could have a situation just like this one, where the poorer party ends up with something it wants much less than the land. Hence

Replicating Online Yankee Auctions to Analyze Auctioneers' and Bidders' Strategies

We present a simulation approach that provides a relatively risk-free and cost-effective environment to examine the decision space for both bid takers and bid makers in web-based dynamic price setting processes. The applicability of the simulation platform is demonstrated for Yankee auctions in particular. We focus on the optimization of bid takers' revenue, as well as on examining the welfare implications of a range of consumer-bidding strategies—some observed, some hypothetical. While these progressive open discriminatory multiunit auctions with discrete bid increments are made feasible by Internet technologies, little is known about their structural characteristics, or their allocative efficiency. The multiunit and discrete nature of these mechanisms renders the traditional analytic framework of gametheory intractable (Nautz and Wolfstetter 1997). The simulation is based on theoretical revenue generating properties of these auctions. We use empirical data from real online auctions to instantiate the simulation's parameters. For example, the bidding strategies of the bidders are specified based on three broad bidding strategies observed in real online auctions. The validity of the simulation model is established and subsequently the simulation model is configured to change the values of key control factors, such as the bid increment. Our analysis indicates that the auctioneers are, most of the time, far away from the optimal choice of bid increment, resulting in substantial losses in a market with already tight margins. The simulation tool provides a test bed for jointly exploring the combinatorial space of design choices made by the auctioneer's and the bidding strategies adopted by the bidders. For instance, a multinomial logit model reveals that endogenous factors, such as the bid increment and the absolute magnitude of the auction have a statistically significant impact on consumer-bidding strategies. This endogeniety is subsequently modeled into the simulation to investigate whether the effects are significant enough to alter the optimal bid increments or auctioneer revenues. Additionally, we investigate hybrid-bidding strategies, derived as a combination of three broad strategies, such as jump bidding and strategic-at-margin (SAM) bidding. We find that hybrid strategies have the potential of significantly altering bidders' likelihood of winning, as well as their surplus.

Analysis and Design of Business-to-Consumer Online Auctions

Business-to-consumer online auctions form an important element in the portfolio of mercantile processes that facilitate electronic commerce activity. Much of traditional auction theory has focused on analyzing single-item auctions in isolation from the market context in which they take place. We demonstrate the weakness of such approaches in online settings where a majority of auctions are multiunit in nature. Rather than pursuing a classical approach and assuming knowledge of the distribution of consumers' valuations, we emphasize the largely ignored discrete and sequential nature of such auctions. We derive a general expression that characterizes the multiple equilibria that can arise in such auctions and segregate these into desirable and undesirable categories. Our analytical and empirical results, obtained by tracking real-world online auctions, indicate that bid increment is an important factor amongst the control factors that online auctioneers can manipulate and control. We show that consumer bidding strategies in such auctions are not uniform and that the level of bid increment chosen influences them. With a motive of providing concrete strategic directions to online auctioneers, we derive an absolute upper bound for the bid increment. Based on the theoretical upper bound we propose a heuristic decision rule for setting the bid increment. Empirical evidence lends support to the hypothesis that setting a bid increment higher than that suggested by the heuristic decision rule has a negative impact on the auctioneer's revenue.

Optimal Design of the Online Auction Channel: Analytical, Empirical, and Computational Insights*

ABSTRACTThe focus of this study is on business‐to‐consumer (B2C) online auctions made possible by the advent of electronic commerce over an open‐source, ubiquitous Internet Protocol (IP) computer network. This work presents an analytical model that characterizes the revenue generation process for a popular B2C online auction, namely, Yankee auctions. Such auctions sell multiple identical units of a good to multiple buyers using an ascending and open auction mechanism. The methodologies used to validate the analytical model range from empirical analysis to simulation. A key contribution of this study is the design of a partitioning scheme of the discrete valuation space of the bidders such that equilibrium points with higher revenue structures become identifiable and feasible. Our analysis indicates that the auctioneers are, most of the time, far away from the optimal choice of key control factors such as the bid increment, resulting in substantial losses in a market with already tight margins. With this in mind, we put forward a portfolio of tools, varying in their level of abstraction and information intensity requirements, which help auctioneers maximize their revenues.