Sciweavers

Share
ECAI
2010
Springer

Addressing the Exposure Problem of Bidding Agents Using Flexibly Priced Options

10 years 5 months ago
Addressing the Exposure Problem of Bidding Agents Using Flexibly Priced Options
Abstract. In this paper we introduce a new option pricing mechanism for reducing the exposure problem encountered by bidding agents with complementary valuations when participating in sequential, second-price auction markets. Existing option pricing models have two main drawbacks: they either apply fixed exercise prices, which may deter bidders with low valuations, thereby decreasing allocative efficiency, or options are offered for free, in which case bidders are less likely to exercise them, thereby reducing seller revenues. The proposed mechanism involving flexibly priced options addresses these problems by calculating the exercise price as well as the option price based on the bids received during an auction. For this new model, which extends and encompasses all the previous models examined, we derive the optimal strategies for a bidding agent with complementary preferences. Finally, we use these strategies to evaluate the proposed option mechanism through Monte-Carlo simutions, an...
Valentin Robu, Ioannis A. Vetsikas, Enrico H. Gerd
Added 08 Nov 2010
Updated 08 Nov 2010
Type Conference
Year 2010
Where ECAI
Authors Valentin Robu, Ioannis A. Vetsikas, Enrico H. Gerding, Nicholas R. Jennings
Comments (0)
books