Explicit results for a class of asset-selling problems

Explicit results for a class of asset-selling problems

0.00 Avg rating0 Votes
Article ID: iaor19993120
Country: Netherlands
Volume: 110
Issue: 3
Start Page Number: 576
End Page Number: 584
Publication Date: Nov 1998
Journal: European Journal of Operational Research
Authors:
Keywords: secretary problem
Abstract:

We consider the following optimal selection problem: There are n identical assets which are to be sold, one at a time, to coming bidders. The bids are independent, identically distributed where there are only two possible bid-values, with known probabilities. The stream of bidders constitutes a general renewal process, and rewards are continuously discounted at a constant rate. The objective is to maximize the total expected discounted revenue from the sale of the n assets. The optimal policy here is stationary, where the decision in question is only whether to accept a low bid or not; the answer is affirmative depending on a critical number n* of remaining assets. In this paper we derive an explicit formula for n*, being a function of the Laplace transform of the renewal distribution evaluated at the discount rate, the probability for a low bid, and the ratio between the two bid-values. We also specify the pertinent value functions. Applications of the model are discussed in detail, and extensions are made to include holding costs and to allow for optimal pricing.

Reviews

Required fields are marked *. Your email address will not be published.