Auctions : the big winner among trading mechanisms for the Internet economy
Auctions are probably the most important mechanism for dynamic pricing in electronic commerce. Although they constitute a very old mechanism as well, the new popularity has raisen a lot of questions on the appropriate design of an auction mechanism for a particular situation. This chapter describes reasons for auction popularity by setting them into the context of trends in electronic commerce. We then illustrate the main issues in auction design. Our analysis starts with simple single-item auctions, as we can see them in many B2C markets. We then look at the more complex auction designs, which are necessary for B2B markets. For the latter design has to take into account that buyers want to purchase collections of items and services, and that the valuation for winning collections is not simply equal to the sum of valuations of single items. We show how multi-item auction mechanisms can benefit from a synthesis of microeconomic and mathematical optimization models.
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- Babaioff, Moshe & Feldman, Michal & Nisan, Noam & Winter, Eyal, 2012. "Combinatorial agency," Journal of Economic Theory, Elsevier, vol. 147(3), pages 999-1034.
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