Price discovery in combinatorial auctions using Gibbs Sampling

Price discovery in combinatorial auctions using Gibbs Sampling

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Article ID: iaor200810
Country: Netherlands
Volume: 42
Issue: 2
Start Page Number: 958
End Page Number: 974
Publication Date: Nov 2006
Journal: Decision Support Systems
Authors: ,
Keywords: artificial intelligence: decision support
Abstract:

Considerable research discusses the advantages and disadvantages of combinatorial auctions. This study addresses a disadvantage, the loss of price discovery for the individual items sold as bundles. Prior studies confirm that there may not be a unique unit-level equilibrium price. We claim a distribution of prices satisfy a given allocation and describe a technique to determine these distributions. Gibbs Sampling allows us to discover characteristics of combinatorial auctions based on the allocated bids. We extract the market-influenced unit-level price, bidder profit, reservation discount distributions and are able to find patterns that depict synergies between products. The posterior distribution provides insights useful to managerial decision making.

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