Simultaneous Bidding with a Fixed Charge if Any Bid is Successful

Stephen A. Smith and Michael H. Rothkopf
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Stephen A. Smith: University of Santa Clara, Santa Clara, California
Michael H. Rothkopf: Lawrence Berkeley Laboratory, Berkeley, California

Operations Research, 1985, vol. 33, issue 1, 28-37

Abstract: We consider the situation in which a bidder faces a group of simultaneous auctions that carry a single fixed charge, which is incurred if and only if one or more of the auctions are won. In a decision theoretic framework, we analyze the bidder's optimal strategy for three alternative formulations of the problem. If the bidder's only decision is selecting the auctions in which to bid, a simple decision rule is derived that holds regardless of the probabilities of winning. We also obtain necessary conditions for selecting the optimal bid levels. Finally, we present a single state variable dynamic programming formulation for obtaining the optimal amounts to bid in statistically independent auctions.

Keywords: 420 pricing; bidding (search for similar items in EconPapers)
Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:33:y:1985:i:1:p:28-37

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