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On Multiplicative Bidding Strategies

Michael H. Rothkopf

Open publisher page 32 citations

Abstract

Some models of competitive bidding consider only bidding strategies in which the bid is a preselected multiple of an estimate of the value (or cost) of the subject of the auction. This paper examines the effect of such a restriction on these models. In order to do so, it is necessary to show that the ratio of two positive random variables (e.g., a cost and a cost estimate) cannot be statistically independent of each of them unless the ratio is always the same.

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What this paper is about

Some models of competitive bidding consider only bidding strategies in which the bid is a preselected multiple of an estimate of the value (or cost) of the subject of the auction. This paper examines the effect of such a restriction on these models. In order to do so, it is necessary to show that the ratio of two positive random variables (e.g., a cost and a cost estimate) cannot be statistically independent of each of them unless the ratio is always the same.

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Available abstract

Some models of competitive bidding consider only bidding strategies in which the bid is a preselected multiple of an estimate of the value (or cost) of the subject of the auction. This paper examines the effect of such a restriction on these models. In order to do so, it is necessary to show that the ratio of two positive random variables (e.g., a cost and a cost estimate) cannot be statistically independent of each of them unless the ratio is always the same.

Key concepts: Bidding, Multiplicative function, Value (mathematics), Order (exchange), Econometrics, Microeconomics, Mathematical optimization, Mathematics

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