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Optimal design of auction is one of hot research topics in the auction theory. During recent years, shill bidding has increased substantially with the explosion in the number of online auctions. This paper designs the optimal online auction with shill bidding and open reserve price. Many optimal auction models have assumed that the number of potential bidders is constant and known. And in these optimal auction models the shill bidding is rare considered, we analyzes theoretically shill bidding in the framework of Riley and Samuelson with a random number of bidders and public reserve price, and explains why sellers may be preferable to shill bidding. Then, we introduce the SPFS and analyses its effect on sellers and design the optimal auction in online English auctions with a random number of bidders and public reserve price under the SPFS. Finally, we conclude the paper and mention a few issues for further investigations.
Date of Conference: 12-14 Oct. 2008