2. Auction Theory

Auctioning has a long history and is reported to have been used in Babylon as early as 500 B.C. The entire Roman Empire was sold off using auction in 193 A.D. [83]. With time, auction theory has evolved with more sophisticated and mature auction procedures. Auction is considered as an efficient and fair mechanism as it provides equal opportunity to both the seller and the buyer. The price of the resources is decided on the basis of the value of the resources for the bidders that makes higher revenue. In early auction days and even during its evolution, only antiques and art matters were sold using auction but now various commodities, e.g. fish, bond, spectrum, computing resources, are sold using auction because of its multifaceted benefits. After the introduction of mechanism design, auction has become a great success in economics for the resource allocation. Mechanism design and information and communication technologies (ICTs) are the two major responsible factors that made game theory and optimization an effective tool for auction design to achieve specific goals. In economics, the rich literature and practical implementation on auction are available. Because of involvement of pricing in resource allocation in Cloud computing, good possibilities can be explored for applying auction in Cloud computing. Academicians have proposed various types of auction models that can be applied in different scenarios in Cloud computing. Spot market has been become a milestone for both, academicians and professionals, to explore auction in greater depth. Amazon, a giant in the Cloud computing market, practically gave a push to implement dynamic pricing using auction. Plenty of works on auction theory, variants of auction as well as its applications for suitable scenario are available in the form of books, survey papers, etc. The aim of this chapter is to provide a detailed description of most important findings of the auction so that academicians and researchers can work their way through these findings in Cloud computing.