Robust auction design under multiple priors by linear and integer programming

Çağıl Koçyiğit, Halil I. Bayrak and Mustafa Ç. Pınar ()
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Halil I. Bayrak: Bilkent University
Mustafa Ç. Pınar: Bilkent University

Annals of Operations Research, 2018, vol. 260, issue 1, No 12, 233-253

Abstract: Abstract It is commonly assumed in the optimal auction design literature that valuations of buyers are independently drawn from a unique distribution. In this paper we study auctions under ambiguity, that is, in an environment where valuation distribution is uncertain itself, and present a linear programming approach to robust auction design problem with a discrete type space. We develop an algorithm that gives the optimal solution to the problem under certain assumptions when the seller is ambiguity averse with a finite prior set $${\mathcal {P}}$$ P and the buyers are ambiguity neutral with a prior $$f\in {\mathcal {P}}$$ f ∈ P . We also consider the case where all parties, the buyers and the seller, are ambiguity averse, and formulate this problem as a mixed integer programming problem. Then, we propose a hybrid algorithm that enables to compute an optimal solution for the problem in reduced time.

Keywords: Optimal auction design; Robustness; Multiple priors; Ambiguity; Linear programming; Mixed-integer programming (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10479-017-2416-4

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