How Much Can Auctioneer get? —Sequential Multi-Unit Auction

Authors: Jane Feng

Winner of the Best Paper Award for the eBusiness Workshop co-sponsored
by eBRC and the Institute for the Study of Business Markets (ISBM)

Auction is an effective mechanism to allocate recourses. The development of WWW and Internet creates new opportunities for auction. While single object auction is very popular, many sites, especially those B-to-B sites and auction houses, turn to sell items in lot size. How many items should be on one lot? How many lots should the auctioneer hold for a certain item? How’s auctioneer’s revenue formed? These are very important questions for the auctioneer, yet not received much research done yet. This paper tries to answer these questions.

Mainly we apply a game theory framework and use backward induction to derive the equilibrium strategy path for both bidder and auctioneer. We consider the case when the auctioneer can hold one period auction, or hold two period auction to sell items in two identical lots, and compare the auctioneer’s expected revenue in these two cases, and offer some suggestions to auctioneer’s strategy.