Andrew Nizamian and Jeff Herman

20 million members Uses Games on Demand Exclusive Content Video Store Indie Games Zune Points sold in discrete packages Approximately 80 points = $1

Let us impose a sealed-bid auction where participants have affiliated valuations and private budget constraints Why? Xbox Live points are non-redeemable People have leftover points, since purchases are made in discrete packages Plays into the gamer mentality More profitable than the current ‘first-come-first-serve’ basis for new content release

Find the auction model most profitable to the Xbox Live Marketplace Find the optimal bidding strategy for the consumer

Andelman, Nir, and Yishay Mansour. "Auctions with Budget Constraints." CiteSeerX. School of Computer Science, Tel-Aviv University, 23 Dec Web. 6 Nov Borgs, Christian, Jennifer Chayes, Nicole Immorlica, Mohammad Mahdian, and Amin Saberi. "Multi-unit Auctions with Budget- Constrained Bidders." Microsoft, 16 Oct Web. 6 Nov Kotowski, Maciej H. "First-Price Auctions with Budget Constraints." Department of Economics, University of California, Berkeley (2011). Web. 5 Nov

These introduce two competing effects on bidding The direct effect: Depression of bids as participants hit their spending limit The strategic effect: Aggressive bidding from participants with larger budgets

Two-part question Determine which model maximizes profit for Xbox Live Investigate which strategies are best for agents within a given model Answer using computational simulation Evaluate performance of bidding strategies/heuristics Test multiple auction environments e.g. First-price vs. Nth-price Implement novel strategies and/or strategies found in literature

We anticipate that the most profitable auction scheme for selling multiple units of a good (e.g., a limited release of a map-pack) will be a sealed-bid Nth-price auction For single goods, a standard sealed-bid second-price auction should be the most effective Caveat: Xbox Live doesn’t profit from the points being spent, they profit from the points being bought We expect the most effective bidding strategy will be aggressive bidding with a large initial budget Side Note: Perception of the Winner’s Curse

Simulation with human participants, and qualitative measures of valuation Simulations (digitized and real) allowing for repurchasing periods between auctions