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arXiv · 2403.07928

Strategic Bidding in Knapsack Auctions

Peyman Khezr·Vijay Mohan·Lionel Page
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Abstract

This paper examines knapsack auctions as a method to solve the knapsack problem with incomplete information, where object values are private and sizes are public. We analyze three auction types-uniform price (UP), discriminatory price (DP), and generalized second price (GSP)-to determine efficient resource allocation in these settings. Using a Greedy algorithm for allocating objects, we analyze bidding behavior, revenue and efficiency of these three auctions using theory, lab experiments, and AI-enriched simulations. Our results suggest that the uniform-price auction has the highest level of truthful bidding and efficiency while the discriminatory price and the generalized second-price auctions are superior in terms of revenue generation. This study not only deepens the understanding of auction-based approaches to NP-hard problems but also provides practical insights for market design.

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Peyman Khezr, Vijay Mohan, Lionel Page. 2024-03-01. Strategic Bidding in Knapsack Auctions. https://arxiv.org/abs/2403.07928

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