International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Determination of the Optimal Strategy in First Prize Private Value Auctions: A Theoretical and Experimental Approach
Oktay Tas, Celal Barkan Güran, Aysun Güran

In this paper firstly we explain auction types and define their general characteristics in the Introduction. Then, we focus on First Prize Sealed Private Value Auction and construct the necessary related mathematical model for this kind of auction according to the number of players in the auction. With these theoretical models we search for the strategy to find the optimal bid amount whose objective is to maximize the payoff from the auction. After completing these theoretical approaches to find an optimal strategy of First Prize Sealed Private Value Auction and forming formulas for it, we begin with the experimental part where we conduct some experiments with real players. In these experiments we find the opportunity to test our theoretical results in a real environment. Lastly, we compare the experiment consequences with the theoretical ones in the Conclusion.

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