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Simultaneous Bidding with a Fixed Charge if Any Bid is Successful

Author

Listed:
  • Stephen A. Smith

    (University of Santa Clara, Santa Clara, California)

  • Michael H. Rothkopf

    (Lawrence Berkeley Laboratory, Berkeley, California)

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.

Suggested Citation

  • Stephen A. Smith & Michael H. Rothkopf, 1985. "Simultaneous Bidding with a Fixed Charge if Any Bid is Successful," Operations Research, INFORMS, vol. 33(1), pages 28-37, February.
    • Handle: RePEc:inm:oropre:v:33:y:1985:i:1:p:28-37
    DOI: 10.1287/opre.33.1.28
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    Keywords

    420 pricing; bidding;

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