Sequential Second Price Auction Research Articles

Auction Pricing Mechanism of Construction Land Quota Based on Preference

In order to study the impact of the location preference of construction land on the auction pricing strategy of construction land quota, this study constructs a first-price auction and two-price auction model for bidders participating in the construction land quota and construction land auction based on the sequential auction theory. Therefore, the role of preference is discussed, and finally the conclusion is verified by an example. The results show that under the two auction modes, preference has a positive impact on the bidding strategy of construction land quota and farmers’ expected income. Compared with sequential first-price auction, the bidding strategy of sequential second-price auction is more competitive, and the quota equilibrium bidding price and farmers’ income obtained are higher.

Sequential second-price auctions with private budgets

We study an auction game in which two units of a good are sold via two second-price auctions sequentially to three or more bidders who have private budgets that limit their spending in the auctions. We characterize the unique symmetric equilibrium. In equilibrium, while bidders bid the minimum of their valuations and budgets in the second auction, their aggression in the first round depends on two factors: the competition from other bidders, as measured by the probability of facing high budget bidders, and, the option value from participating the second auction, as measured by the budget difference between various bidders. The former factor makes bidders more aggressive and the latter makes them less aggressive. In particular, when the competition factor dominates, the sequential auctions generate higher revenue in expectation than the uniform price auction.

Renewable electricity trading through SLAs

Energy systems are in transition towards more sustainable generation portfolios. In the envisioned smart grid generation will primarily depend on renewable power sources making uncertain quantities of electricity available, the delivery of which cannot be guaranteed. Current electricity tariffs promise certain delivery, and are thus not well-suited to trade uncertain quantities. However, if not traded the electricity might need to be curtailed, foregoing potential benefits for both supply and demand sides. We propose to adopt service level agreements (SLAs) that comprise quantity, reliability, and price, for electricity trading in settings where supply depends on volatile power sources. We define a characterization of the value degradation of tolerant and critical buyers with regards to the uncertainty of electricity delivery generalizing the widely used value of lost load (VoLL). This captures buyers’ varying abilities to cope with uncertainty. We consider allocating SLAs to buyers using either a sequential second-price auction or the combinatorial Vickrey-Clarke-Groves (VCG) mechanism that is known to elicit truthful bids, and discuss the settings in which we can obtain truthfulness in the sequential setting. In addition, we empirically compare their performance and demonstrate that VCG dominates alternative allocations and vastly improves the efficiency of the proposed system, when compared to baseline allocations that only use the VoLL. This article hence contributes an essential component to the future smart grid by facilitating distributed energy trading under uncertainty.

Sequential auctions of heterogeneous objects

We consider sequential second-price auctions in which heterogeneous objects are sold to bidders with unit demand and a single dimensional type. We show that a symmetric increasing equilibrium exists if objects are ordered in terms of dispersiveness of value distributions. Equilibrium price declines when objects are equivalent on average and additional conditions hold.

Sequential negotiations with costly information acquisition

Negotiations about a merger or acquisition are often sequential and only partially disclose to bidders information about each otherʼs bids. This paper explains the seller optimality of partial disclosure in a single-item private-value auction with two bidders. Each bidder can inspect the item at a nonprohibitive cost. If a revenue-maximizing seller cannot charge bidders for the information about the otherʼs bid, then the seller optimally runs a sequential second-price auction with a reserve price and a buy-now price. The seller prefers to keep the bids confidential and, sometimes, to hide the order in which he approaches the bidders.

A note on sequential auctions with multi-unit demand

Within the independent private value paradigm, this note first analyzes two-round sequential first-price auctions with multi-unit demand. We show that the expected price in the first round is strictly lower than that in the second round due to the “extraction effect”. We then compare the revenues for the sequential auctions and the simultaneous auctions. We show that the discriminatory auction, the Vickrey auction, and the sequential second-price auctions generate the same revenue for the seller, followed in order by the sequential first-price auctions, and by the uniform-price auction.

Auctions with dynamic populations: Efficiency and revenue maximization

We examine an environment where goods and privately informed buyers arrive stochastically to a market. A seller in this setting faces a sequential allocation problem with a changing population. We characterize the set of incentive compatible allocation rules and provide a generalized revenue equivalence result. In contrast to a static setting where incentive compatibility implies that higher-valued buyers have a greater likelihood of receiving an object, in this dynamic setting, incentive compatibility implies that higher-valued buyers have a greater likelihood of receiving an object sooner. We also characterize the set of efficient allocation rules and show that a dynamic Vickrey-Clarke-Groves mechanism is efficient and dominant strategy incentive compatible. We then derive an optimal direct mechanism. We show that the revenue-maximizing direct mechanism is a pivot mechanism with a reserve price. Finally, we consider sequential ascending auctions in this setting, both with and without a reserve price. We construct memoryless equilibrium bidding strategies in this indirect mechanism. Bidders reveal their private information in every period, yielding the same outcomes as the direct mechanisms. Thus, the sequential ascending auction is a natural institution for achieving either efficient or optimal outcomes. Interestingly, this is not the case for sequential second-price auctions, as the bids in a second-price auction do not reveal sufficient information to realize either the efficient or optimal allocation.

Sequential Bandwidth and Power Auctions for Distributed Spectrum Sharing

We study a sequential auction for sharing a wireless resource (bandwidth or power) among competing transmitters. The resource is assumed to be managed by a spectrum broker (auctioneer), who collects bids and allocates discrete units of the resource via a sequential second-price auction. It is well known that a second price auction for a single indivisible good has an efficient dominant strategy equilibrium; this is no longer the case when multiple units of a homogeneous good are sold in repeated iterations. For two users with full information, we show that such an auction has a unique equilibrium allocation. The worst-case efficiency of this allocation is characterized under the following cases: (i) both bidders have a concave valuation for the spectrum resource, and (ii) one bidder has a concave valuation and the other bidder has a convex valuation (e.g., for the other useriquests power). Although the worst-case efficiency loss can be significant, numerical results are presented, which show that for randomly placed transmitter-receiver pairs with rate utility functions, the sequential second-price auction typically achieves the efficient allocation. For more than two users it is shown that this mechanism always has a pure strategy equilibrium, but in general there may be multiple equilibria. We give a constructive procedure for finding one equilibrium; numerical results show that when all users have concave valuations the efficiency loss decreases with an increase in the number of users.

Synergies and price trends in sequential auctions

In this paper we consider sequential second-price auctions where an individual's value for a bundle of objects is either greater than the sum of the values for the objects separately (positive synergy) or less than the sum (negative synergy). We show that the existence of positive synergies implies declining expected prices. When synergies are negative, expected prices are increasing.

Auctions for Split‐Award Contracts

The buyer of a homogeneous input divides his input requirements into two contracts that are awarded to different suppliers. He uses a sequential second‐price auction to award a primary and a secondary contract. With a fixed number of suppliers the buyer pays a higher expected price than with a sole‐source auction. The premium paid to the winner of the secondary contract must also be paid to the winner of the primary contract as an opportunity cost. When entry is endogenous, we identify the conditions under which a secondary contract can increase the number of suppliers and lower the expected price.