Preventing market collapse in auctions for perishable Internet of Things resources

Abstract

We are entering the era of digital business moments where autonomous things will buy and sell services from each other in order to make people's life easier. They will also negotiate in order to achieve the best price for their services which will result in Internet of Things auctions. Such auctions will be combinatorial and recurrent. Recurrent auctions pose a problem of bidder drop which leads to market collapse. Moreover, in Internet of Things, bidders will employ different strategies according to their pattern of consuming resources. We describe two bidding strategies which may lead to market collapse or very low revenue: opportunistic and periodic bidding. We devise two algorithms: revenue maximizing auction and highest bid lock auction, analyze their performance under these two bidding strategies, and compare them to traditional combinatorial auction. We find out that the revenue maximizing auction prevents market collapse under opportunistic bidding while highest bid lock auction provides the highest revenue under both strategies.