ITR/AP: Auction Mechanisms for Complex Resource Allocation Problems

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In this Information Technology Research (ITR) research project, a study of the design and use of auction mechanisms for the allocation of scarce resources in complex settings will be performed. The research includes four specific goals: (1) the design and development of appropriate bidding environments, (2) the identification of participants bidding strategies under well defined bidding environments, (3) the development of an understanding of the tradeoffs between computational complexity and "goodness" of solution under various bidding environments, and (4) the development of an educational program and educational tools for teaching the theory and practice of auctions. Amid the wide range of settings where bidding mechanisms are utilized, attention will be focused on four important applications spanning the range of issues that can arise in a bidding environment: (1) simple multi-unit auctions in e-commerce, (2) combinatorial auctions in industrial procurement, (3) coordination and control of multiple robots in uncertain environments, and (4) task allocation on a logistics network for ocean carriers. In essence, an auction is a mechanism by which a set of participants communicates information so as to result in a set of allocations taking place. Information that is communicated by a participant is called a bid. The auction designer strives to design a mechanism that has desirable characteristics, appropriate for the situation at hand. Auctions can particularly benefit environments with the following two characteristics: (1) the absence of complete information about the participants and (2) problems which cannot be solved centrally due to their high computational complexity. While the use of auctions has been applied in numerous market settings, the research in auction theory has severely lagged behind. There is little in the literature to guide bidders on how to "optimally" bid or to aid auctioneers in evaluating the performance of various auction formats. Even the auction consultants will admit that much of their advice is based on logic and past experiences, rather than rooted in analytical findings. It is the goal of this research to close the gap between practice and theory by advancing the state of the knowledge in the design of auction mechanisms for the allocation of scarce resources in complex settings. The successful completion of this research will broaden the understanding and use of multi-unit auctions as a transaction medium and increase the efficacy of such transactions. Since the researchers will be working closely with industry partners including IBM, Home Depot, Schneider Logistics, and Orient Overseas Container Line (OOCL), the research will be focused on realistic applications. There will also be a significant educational impact in terms of case study development, new course offerings, and the development of classroom bidding games.