Analysis of Automated Auctions

Web based computerised auctions are increasingly present in the Internet, and we can imagine that in the future automated buyer and seller agents will conduct automated transactions in this manner. The purpose of this paper is to model automated bidders and sellers which interact through a computerised auction. We model bidding process using random processes with discrete state-space. We obtain analytical solutions for a variety of single auction models, including English and Vickrey auctions, and relate the income per unit time to the other parameters including the rate of arrival of bids, the seller’s decision time, the value of the good, and the “rest time” of the seller between successive auctions. We examine how the seller’s “decision time” impacts the expected income per unit time received by the seller, and illustrate its effect via numerical examples.