Communications in Information and Systems
Volume 2 (2002)
Optimal price decremental strategy for Dutch auctions
Pages: 411 – 434
In a Dutch auction, the price of an item decreases incrementally from the starting price at regular intervals. A bidder may buy the item at any time and stop the auction at the current price. This paper presents an optimal price decrement strategy in a Dutch auction, such that the expected revenue of the auction host is maximized. Properties of the optimal solution and a simple iterative solution methodology are discussed. Numerical studies show that significant gain could be obtained compared with a simple reference strategy.
Dutch auction, optimal auction, bidding, 3G, wireless application protocol, optimization, time discounting, online auction