Evaluating Strategies for Penny Auctions Using Multi-Agent Systems

Abstract

During the last years, all-pay auctions have been established as a new type of online auctions. They differ from common auctions like eBay, as making a fee-based tender will increase the remaining auction time slightly and the item’s price by only a single cent. These so called penny auctions end when the auction time expires resulting in the majority of the bidders losing their stake.

However, various countries considered this trend to be dangerous due to its uncertain outcome, hence, providing penny auctions has been prohibited. Furthermore, the question whether all-pay auctions must be assumed being gambling games has been discussed by scientists as well. For matching different argumentations concerning empirical evidence and statistics we propose an approach of using multi-agent systems for evaluating penny auctions. By using software agents for the representation of competing bidders pursuing different strategies, the simulation of distinct scenarios for identifying potentially dominant strategies is provided.