Replicating Online Yankee Auctions to Analyze Auctioneers' and Bidders' Strategies
Authors: Bapna, Ravi; Goes, Paulo; Gupta, Alok
Journal: Information Systems Research (2003)
DOI: 10.1287/isre.14.3.244.16562
<jats:p> 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 vali…