Distributed Risk Aversion Parameter Estimation for First-Price Auction in Sensor Networks

Following the Internet, the Internet of Things (IoT) becomes a prime vehicle for supporting auction. The use of market mechanisms to solve computer science problems is gaining significant traction. More and more clues show that the bidders tend to be risk-averse ones. However, traditional nonparametric approach is only applicable for the case of risk neutrality in a centralized server. This study proposes a generalized nonparametric structural estimation procedure for the first-price auctions in the distributed sensor networks. To evaluate the performance of the aggregated parameter estimators, extensive Monte Carlo simulation experiments are conducted for ten different values of risk aversion parameters including the risk neutrality case in multiple classic scenes. Moreover, in order to improve the usability of the aggregated parameter estimators, some guidance is also given for real-world applications. 1. Introduction Auctions are suggested as a basic pricing mechanism for setting prices for access to shared resources, including bandwidth sharing in wireless sensor networks (WSNs) [1]. Following the Internet, the Internet of Things (IoT) [2, 3] becomes a prime vehicle for supporting auction [4]. Moreover, the use of market mechanisms to solve computer science problems such as resource sharing [1, 5, 6], load awareness [7], task allocation [8], and network routing [9–11], is gaining significant traction. In addition to the real-time concerns associated with auctions in distributed sensor networks (DSNs), privacy concerns are also very important [12–15]. Therefore, many protocols are proposed in the literature. For example, the protocol for a sealed-bid auction proposed by Franklin and Reiter [12] uses a set of distributed auctioneers and features an innovative primitive called verifiable signature-sharing. Recently, Lee et al. [14] put forward an efficient multiround anonymous auction protocol. When there are more than one party bidding the same highest price for auctioned objects, the protocol picks out the bidders offering the same highest price in the first round to the next round. Risk aversion is used to explain the advertisers’ behavior under uncertainty. The auction model and the optimal mechanism design for risk-averse bidders have been studied by [16–18]. Within the private value paradigm, risk-averse bidders tend to shade less their private values relative to the risk neutral case, which often results in some overbidding [19]. More and more clues show that the bidders indeed tend to be risk-averse ones [20–22]. In recent years, in order to