A first-bid auction model with a fictitious buyer (Q5954767)

A mathematical model of regulating the behavior of auction participants in the interests of the auctioneer by means of introduction of a fictitious participant is considered. The problem of choosing the optimal strategy of the fictitious participant is solved. It is assumed that other participants are informed of the bid of the fictitious participant, and they choose their strategies proceeding from the principle of dominance elimination procedure. The optimal strategy, i.e., the bid of the fictitious participant that ensures the maximal profit of the auctioneer, is found. The model corresponds to the scheme of holding a first bid auction widely used in practice. The result is interesting both as regards the development of the methods of regulation of some markets (in particular, the state stock market) and as regards the elaboration of measures for supporting honest competition.