Reverse auctions game theory

Sellers have their private valuation of their plots. The buyer will hold a closed bid procurement auction. The profit for the buyer is greater if he purchases all plots of land as compared to any 2 plots without any specific order , which itself is greater than profit for a single plot. Does someone have an idea of how strategies will be developed for the sellers in equilibrium? I will later extend it to multiple rounds reverse auctions.

Given the very general description of the problem, I can think of the following also very general way of formulating it mathematically. The rest is just to solve for the bidding function. I will leave you to finish the remaining steps.

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Create a free Team What is Teams? Learn more. Reverse Auction bidding strategy Ask Question. Asked 4 years, 2 months ago. Active 4 years, 2 months ago. Viewed times. Improve this question.

Siddharth Sharma 3 3 3 bronze badges. How does size of the individual plots affect the value? Does every seller own a single plot or multiple ones? Add a comment. I'm trying to find the correct formula to calculate de expected revenue of a reverse auction , properly, a second-price sealed-bid procurement auction to identify the lowest cost supplier.

Prices are private, independent, and uniformly distributed between 50 to And the number of bidders are We know that it does not matter whether we use a first-price or a second price auction - the expected final price is the same. Now, this is a reverse auction, so the expected price stems from the ordering of bids. In a reverse auction, the price is not dependent on the value of the n-1 th bidder, but on the second bidder.

Hint : In second price sealed bid, it is optimal to bid your own valuation for the good. So in a reverse auction, it is optimal for each person to bid their lowest possible price they are willing to supply at. Intuitively, if one individual deviates from that strategy, it doesn't increase their chance of winning the auction or increase their chance at getting a higher priced contract, since the price they supply is based on other contractors' bids.

So the expected revenue is going to be the average value of the second lowest bidder amongst ten bidders. Try to set up an integral to describe the distribution and go from there.

So you can easily apply a similar logic to your reverse auction. Sign up to join this community. The best answers are voted up and rise to the top. Stack Overflow for Teams — Collaborate and share knowledge with a private group. Create a free Team What is Teams? Learn more. How to calculate expected revenue in reverse auctions procurement Ask Question. Asked 6 years ago. Active 6 years ago.

Viewed times. And the number of bidders are 10 We know that it does not matter whether we use a first-price or a second price auction - the expected final price is the same.