Adversarial Risk Analysis for First-Price Sealed-Bid Auctions
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Adversarial Risk Analysis (ARA) is an upcoming methodology that is considered to have several advantages over game theory. ARA solutions for first-price sealed-bid (FPSB) auctions have been found but only under strong assumptions which make the model somewhat unrealistic. In this paper, we use ARA methodology to model FPSB auctions using more realistic assumptions. We define a new utility function that considers bidders' wealth, we assume a reserve price and find solutions not only for risk-neutral but also for risk-averse as well as risk-seeking bidders. We model the problem using ARA for the non-strategic play and the Bayes Nash equilibrium (BNE) solution concepts.
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