Optimal Strategy Against Straightforward Bidding in Clock Auctions

Jad Zeroual, Marianne Akian, Aurélien Bechler, Matthieu Chardy, Stéphane Gaubert

Abstract: We study a model of auction representative of the 5G auction in France. We determine the optimal strategy of a bidder, assuming that the valuations of competitors are unknown to this bidder and that competitors adopt the straightforward bidding strategy. Our model is based on a Partially Observable Markov Decision Process (POMDP). We show in particular that this special POMDP admits a concise statistics, avoiding the solution of a dynamic programming equation in the space of beliefs. We illustrate our results by numerical experiments, comparing the value of the bidder with the value of a perfectly informed one.