IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2503.22726.html
   My bibliography  Save this paper

InfoBid: A Simulation Framework for Studying Information Disclosure in Auctions with Large Language Model-based Agents

Author

Listed:
  • Yue Yin

Abstract

In online advertising systems, publishers often face a trade-off in information disclosure strategies: while disclosing more information can enhance efficiency by enabling optimal allocation of ad impressions, it may lose revenue potential by decreasing uncertainty among competing advertisers. Similar to other challenges in market design, understanding this trade-off is constrained by limited access to real-world data, leading researchers and practitioners to turn to simulation frameworks. The recent emergence of large language models (LLMs) offers a novel approach to simulations, providing human-like reasoning and adaptability without necessarily relying on explicit assumptions about agent behavior modeling. Despite their potential, existing frameworks have yet to integrate LLM-based agents for studying information asymmetry and signaling strategies, particularly in the context of auctions. To address this gap, we introduce InfoBid, a flexible simulation framework that leverages LLM agents to examine the effects of information disclosure strategies in multi-agent auction settings. Using GPT-4o, we implemented simulations of second-price auctions with diverse information schemas. The results reveal key insights into how signaling influences strategic behavior and auction outcomes, which align with both economic and social learning theories. Through InfoBid, we hope to foster the use of LLMs as proxies for human economic and social agents in empirical studies, enhancing our understanding of their capabilities and limitations. This work bridges the gap between theoretical market designs and practical applications, advancing research in market simulations, information design, and agent-based reasoning while offering a valuable tool for exploring the dynamics of digital economies.

Suggested Citation

  • Yue Yin, 2025. "InfoBid: A Simulation Framework for Studying Information Disclosure in Auctions with Large Language Model-based Agents," Papers 2503.22726, arXiv.org.
  • Handle: RePEc:arx:papers:2503.22726
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2503.22726
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    2. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    3. Jonathan Levin & Paul Milgrom, 2010. "Online Advertising: Heterogeneity and Conflation in Market Design," American Economic Review, American Economic Association, vol. 100(2), pages 603-607, May.
    4. Feinberg Yossi & Tennenholtz Moshe, 2005. "Anonymous Bidding and Revenue Maximization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-12, October.
    5. Dirk Bergemann & Tibor Heumann & Stephen Morris & Constantine Sorokin & Eyal Winter, 2022. "Optimal Information Disclosure in Classic Auctions," American Economic Review: Insights, American Economic Association, vol. 4(3), pages 371-388, September.
    6. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    7. Milgrom, Paul, 2010. "Simplified mechanisms with an application to sponsored-search auctions," Games and Economic Behavior, Elsevier, vol. 70(1), pages 62-70, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frank Kelly & Peter Key & Neil Walton, 2016. "Efficient Advert Assignment," Operations Research, INFORMS, vol. 64(4), pages 822-837, August.
    2. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    3. Dirk Bergemann & Marek Bojko & Paul DŸtting & Renato Paes Leme & Haifeng Xu & Song Zuo, 2025. "Data-Driven Mechanism Design: Jointly Eliciting Preferences and Information," Cowles Foundation Discussion Papers 2418R1, Cowles Foundation for Research in Economics, Yale University.
    4. Walter Beckert, 2004. "Dynamic Monopolies with Stochastic Demand," Birkbeck Working Papers in Economics and Finance 0404, Birkbeck, Department of Economics, Mathematics & Statistics.
    5. Hu, Audrey & Offerman, Theo & Zou, Liang, 2011. "Premium auctions and risk preferences," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2420-2439.
    6. Drake, Samielle & Xu, Fei, 2023. "Regulation and Competition in Public Procurement," Umeå Economic Studies 1013, Umeå University, Department of Economics.
    7. Said, Maher, 2012. "Auctions with dynamic populations: Efficiency and revenue maximization," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2419-2438.
    8. Quintero Jaramillo, Jose E., 2004. "Liquidity constraints and credit subsidies in auctions," DEE - Working Papers. Business Economics. WB wb040604, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    9. Amar Cheema & Dipankar Chakravarti & Atanu R. Sinha, 2012. "Bidding Behavior in Descending and Ascending Auctions," Marketing Science, INFORMS, vol. 31(5), pages 779-800, September.
    10. Che,Y.-K. & Kim,J., 2001. "Know thy enemies : knowledge of rivals' types and its effect on auctions," Working papers 9, Wisconsin Madison - Social Systems.
    11. Peter M. DeMarzo & Ilan Kremer & Andrzej Skrzypacz, 2005. "Bidding with Securities: Auctions and Security Design," American Economic Review, American Economic Association, vol. 95(4), pages 936-959, September.
    12. Andrew Komo & Scott Duke Kominers & Tim Roughgarden, 2024. "Shill-Proof Auctions," Papers 2404.00475, arXiv.org, revised Nov 2024.
    13. SHINOZAKI, Hiroki, 2024. "Shill-proof rules in object allocation problems with money," Discussion paper series HIAS-E-137, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    14. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    15. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
    16. Michel Mougeot & Pierre Malgrange, 2002. "Présentation générale," Économie et Prévision, Programme National Persée, vol. 156(5), pages 1-7.
    17. Abraham, Ittai & Athey, Susan & Babaioff, Moshe & Grubb, Michael D., 2020. "Peaches, lemons, and cookies: Designing auction markets with dispersed information," Games and Economic Behavior, Elsevier, vol. 124(C), pages 454-477.
    18. Hu, Youxin & Kagel, John & Xu, Xiaoshu & Ye, Lixin, 2013. "Theoretical and experimental analysis of auctions with negative externalities," Games and Economic Behavior, Elsevier, vol. 82(C), pages 269-291.
    19. Yonghong Long, 2009. "Bidders¡¯ Risk Preferences in Discriminative Auctions," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 215-223, May.
    20. Hernando-Veciana, Ángel, 2009. "Information acquisition in auctions: Sealed bids vs. open bids," Games and Economic Behavior, Elsevier, vol. 65(2), pages 372-405, March.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2503.22726. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.