Description:  In economic theory, an auction is a method for determining the value of a commodity that has an undetermined or variable price.  Auction theory is a branch of game theory which deals with how people act in auction markets and studies auction design with regards to efficiency, optimal bidding strategies, and revenue comparison.  Recently, auction theory has played an important role in the development of new auction systems designed for the privatization of public-sector companies or the sale of licenses for use of the electromagnetic spectrum.

We will start the research project by learning some of the necessary basics from game theory and probability theory and becoming familiar with some of the more traditional auction types.  These types include the English auction, Dutch auction, the sealed-bid first-price auction, and the sealed-bid second-price auction.  We will then look at the work of William Vickrey, who is considered a pioneer in using game theory as a tool to analyze auctions.  Vickrey won the Nobel Prize in Economics in 1996 partly for his ground breaking work on auction theory.

Students who are interested in participating in the Mathematical Contest in Modeling will find this research experience to be a great way of preparing for the competition.  Students will be exposed to the mathematical modeling process and learn first hand how modeling can provide tremendous insight in the investigative process.  This summer research experience will also provide a number of opportunities for further research for those students interested in continued study.

For more information about this research project contact Rick Spellerberg, Carver 337.