Simultaneous Bidding with a Fixed Charge if Any Bid is Successful
Stephen A. Smith, Michael H. Rothkopf
Operations Research · 1985 · Volume 33 · Issue 1
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
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