Price discovery in combinatorial auctions using Gibbs sampling

Authors:
Joni L. Jones;Richard W. Andrews
Affiliations:
Information Systems and Decision Sciences, College of Business Administration, University of South Florida, FL;Statistics and Management Science, University of Michigan Business School
Venue:
Decision Support Systems
Year:
2006

Citing 3
Cited 0

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Iterative combinatorial auctions: achieving economic and computational efficiency

Iterative combinatorial auctions: achieving economic and computational efficiency

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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.