Online Auctions: Notes on Theory, Practice, and the Role of Agents

Abstract

On-line auctions constitute a multi-billion market, which is still growing in size and reach. Classical theory of auctions offers on-line auctioneers opportunities for maximizing gains, as long as they carefully select appropriate mechanisms for the market of interest. Studies in recent years have provided auctioneers with additional, improved mechanisms and strategies for maximizing profits. In this respect, on-line auctioneers utilize the state of the art in auction theory, in practicality. In contrast, bidders in electronic auctions hardly use optimal strategies known in classical auction theory, let alone more recent results on optimal bidding. Researchers have suggested that agents could simplify the implementation of optimized bidder strategies. Such solutions, although well studied, analyzed and demonstrated, are rarely found in commercial applications. In this lecture we will present examples of current commercial online auctions and the gains they provide the auctioneer side with. We will further present some recent research results on automated and optimized bidding and the use of agents for such bidding. Following these, we will discuss the major enables and inhibitors of commercial bidder side agents. We will conclude with an open discussion on the future of bidder-side agents.