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Auction theory is a branch of applied economics that deals with how bidders act in auctions and researches how the features of auctions incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-world auctions. Sellers use auction theory to raise higher revenues while allowing buyers to procure at a lower cost.
An auction algorithm has been used in a business setting to determine the best prices on a set of products offered to multiple buyers. It is an iterative procedure, so the name "auction algorithm" is related to a sales auction, where multiple bids are compared to determine the best offer, with the final sales going to the highest bidders.
The Myerson–Satterthwaite theorem is an important result in mechanism design and the economics of asymmetric information, and named for Roger Myerson and Mark Satterthwaite. [1]
For each standard auction format A, suppose that the auction has a symmetric and increasing equilibrium β A, which is a mapping from a bidder's observed signal to its bid. Let W A ( z , x ) {\displaystyle W^{A}(z,x)} denote the expected payment by a bidder if he is the winning bidder when he receives a signal x but bids as if their signal were ...
The branch of economic theory dealing with auction types and participants' behavior in auctions is called auction theory. The open ascending price auction is arguably the most common form of auction and has been used throughout history. [1] Participants bid openly against one another, with each subsequent bid being higher than the previous bid. [2]
A VCG mechanism can also be used in a double auction. It is the most general form of incentive-compatible double-auction since it can handle a combinatorial auction with arbitrary value functions on bundles. Unfortunately, it is not budget-balanced: the total value paid by the buyers is smaller than the total value received by the sellers.
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The generalized second-price auction (GSP) is a non-truthful auction mechanism for multiple items. Each bidder places a bid. The highest bidder gets the first slot, the second-highest, the second slot and so on, but the highest bidder pays the price bid by the second-highest bidder, the second-highest pays the price bid by the third-highest, and so on.