Subsidies, Knapsack Auctions and Dantzigâ€™s Greedy Heuristic
A budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by quality and sellers have private reserve prices for their items. Sellers quote prices strategically, inducing a knapsack game. The buyerâ€™s problem is to select a subset of maximal quality. We propose a buying mechanism which can be viewed as a game theoretic extension of Dantzigâ€™s greedy heuristic for the classic knapsack problem. We use Monte Carlo simulations to analyse the performance of our mechanism. Finally, we discuss how the mechanism can be applied to award R&D subsidies.
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- Giebe, Thomas & Grebe, Tim & Wolfstetter, Elmar G., 2005.
"How to Allocate R&D (and Other) Subsidies: An Experimentally Tested Policy Recommendation,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
108, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Giebe, Thomas & Grebe, Tim & Wolfstetter, Elmar, 2006. "How to allocate R&D (and other) subsidies: An experimentally tested policy recommendation," Research Policy, Elsevier, vol. 35(9), pages 1261-1272, November.
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