Optimal constrained bidding |
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Authors: | Prof R Engelbrecht-Wiggans |
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Institution: | 1. Department of Business Administration, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, 61820, Champaign, IL, USA
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Abstract: | Consider a bidder who, subject only to a constraint on his choice of bidding strategy, will choose a strategy that maximizes his expected gross receipts. The bidder's choice of strategy may be constrained by an upper limit on exposure, an upper limit on expected expenditures, or a lower limit on expected profits. We prove that constraining the bidder only by an appropriate upper limit on expected expenditures in effect limits him to expected profit maximizing strategies; in many examples, expected profit maximizing strategies can not be induced by solely limiting the bidder's exposure. |
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