On optimal bidding in sequential procurement auctions

Michael N. Katehakis, Rutgers Business School—Newark and New Brunswick
Kartikeya S. Puranam, Rutgers Business School—Newark and New Brunswick

Abstract

We investigate the problem of optimal bidding for a firm that in each period procures items to meet a random demand by participating in a finite sequence of auctions. We develop a new model for a firm where its item valuation derives from the sale of the acquired items via their demand distribution, sale price, acquisition cost, salvage value and lost sales. We establish monotonicity properties for the value function and the optimal dynamic bid strategy and we present computations. © 2012 Elsevier B.V. All rights reserved.