COMBINATORIAL AUCTIONS WITH TRANSPORTATION COST

The ability to discover equilibrium prices efficiently makes auctions an effective way to trade goods. One of the recent trends in the development of auctions is combinatorial auctions. Combinatorial auctions allow the simultaneous sale of more than one item. In the existing literature, the factor of transportation cost has not been considered in combinatorial auctions. In this paper, we formulate the combinatorial double auction problem and propose an algorithm for finding approximate solutions. The algorithm is developed by applying the subgradient algorithm to iteratively adjust the shadow prices and proposing a heuristic algorithm for finding approximate solutions. A numerical example is used to illustrate the preliminary result