Ascending prices and package bidding: Further experimental analysis

We explore the performance of multi-round, price-guided combinatorial auctions for a previously untested class of value profiles in which synergies arise from shared fixed costs. We find that, in many cases, a simulator that bids straightforwardly does well in predicting auction performance, but exceptions arise because human bidders sometimes rely on cues besides prices to guide their package selection and because they sometimes bid aggressively on items for which they have no value in order to increase payments by bidders seeking complementary packages. In our experiments, this latter behavior not only raises prices, but can also improve efficiency by mitigating the threshold problem. Comparisons between a combinatorial clock auction (CCA) and a simultaneous ascending auction (SAA) are reported.     

Ascending price Vickrey auctions for general valuations

Ascending price auctions involving a single price path and buyers paying their final bid price cannot achieve the Vickrey-Clarke-Groves (VCG) outcome in the combinatorial auctions setting. Using a notion called universal competitive equilibrium prices, shown to be necessary and sufficient to achieve the VCG outcome using ascending price auctions, we define a class of ascending price auctions in which buyers bid on a single price path. Truthful bidding by buyers is an ex post Nash equilibrium in such auctions. By giving discounts to buyers from the final price, the VCG outcome is achieved for general valuations.     

Ascending price Vickrey auctions

We show that an ascending price auction for multiple units of a homogeneous object proposed by Ausubel (i) raises prices for packages until they reach those nonlinear and non-anonymous market clearing prices at which bidders get their marginal products and (ii) the auction is a primal–dual algorithm applied to an appropriate linear programming formulation in which the dual solution yields those same market clearing prices. We emphasize the similarities with efficient incentive compatible ascending price auctions to implement Vickrey payments when there is a single object or when objects are heterogeneous but each buyer does not desire more than one unit. A potential benefit of these common threads is that it helps to establish the principles upon which Vickrey payments may be implemented through decentralized, incentive compatible procedures.     

Side-communication yields efficiency of ascending auctions: The two-items case

We analyze a simultaneous ascending auction with anonymous item prices, for two items that are substitutes. This popular format entails increased opportunities for coordination among bidders, since bids are observable and can be used as signaling. This has happened, e.g., in the Netherlands 3G Telecom Auction and in the FCC auctions.While it may seem that such bidding harms economic efficiency, we show that side communication may actually improve efficiency: We describe an ex-post subgame-perfect equilibrium, with limited communication, that is ex-post efficient. In contrast, without communication, we show that there is no ex-post equilibrium which is ex-post efficient in this auction.In this equilibrium, bidders initially report true demands, and then perform a single demand reduction at a certain point, determined using a single message exchanged between the bidders. This limited signaling opportunity resolves the strategic problems of myopic bidding, and may improve the social welfare.     

Demand reduction and preemptive bidding in multi-unit license auctions

Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and efficiency, while entrants’ chances are similar across the two formats.     

A comparison of first price multi-object auctions

We compare simultaneous multi-object English-type ascending price auctions with first price sealed bid auctions in private values environments with multi-object demands. Special attention is paid to the effect of closing rules on ascending auctions’ outcomes. We find that simultaneous ascending auctions with the soft closing rule are the most efficient, while the sealed bid auctions generate the highest revenue. Ascending auctions with the hard closing rule display a significant amount of late bidding, resulting in the lowest among the three institutions revenue and efficiency.

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Electronic Supplementary Material  The online version of this article () contains supplementary material, which is available to authorized users.      

On ascending Vickrey auctions for heterogeneous objects

We construct an ascending auction for heterogeneous objects by applying a primal-dual algorithm to a linear program that represents the efficient-allocation problem for this setting. The auction assigns personalized prices to bundles, and asks bidders to report their preferred bundles in each round. A bidder's prices are increased when he belongs to a “minimally undersupplied” set of bidders. This concept generalizes the notion of “overdemanded” sets of objects introduced by Demange, Gale, and Sotomayor for the one-to-one assignment problem. Under a submodularity condition, the auction implements the Vickrey-Clarke-Groves outcome; we show that this type of condition is somewhat necessary to do so. When classifying the ascending-auction literature in terms of their underlying algorithms, our auction fills a gap in that literature. We relate our results to various ascending auctions in the literature.     

A note on Peters and Severinov, “Competition among sellers who offer auctions instead of prices”

We consider a market in which sellers compete for buyers by advertising reserve prices for second-price auctions. Applying the limit equilibrium concept developed in Peters and Severinov (1997) [1], we show that the competitive matching equilibrium is characterized by a reserve price of zero. This corrects a result in Peters and Severinov (1997) [1].     

Bottom-Fishing and Declining Prices in Sequential Auctions

We study standard sequential auctions, in which the seller chooses the order of sale, and right-to-choose auctions, in which the winner chooses her preferred item from the remaining items. Empirically, prices in sequential auctions tend to decline, and sellers often hold right-to-choose auctions. In our setting, the right-to-choose format guarantees declining prices and efficiency. In the standard auction, a buyer may submit a low bid for the first item ("bottom-fishing") despite its being her less-preferred item. An example shows that the standard auction has declining prices, is inefficient, and gives lower expected revenue than the right-to-choose. Journal of Economic Literature Classification Numbers: D44, D82.     

Truthful approximation mechanisms for restricted combinatorial auctions

When attempting to design a truthful mechanism for a computationally hard problem such as combinatorial auctions, one is faced with the problem that most efficiently computable heuristics can not be embedded in any truthful mechanism (e.g. VCG-like payment rules will not ensure truthfulness).We develop a set of techniques that allow constructing efficiently computable truthful mechanisms for combinatorial auctions in the special case where each bidder desires a specific known subset of items and only the valuation is unknown by the mechanism (the single parameter case). For this case we extend the work of Lehmann, O'Callaghan, and Shoham, who presented greedy heuristics. We show how to use If-Then-Else constructs, perform a partial search, and use the LP relaxation. We apply these techniques for several canonical types of combinatorial auctions, obtaining truthful mechanisms with provable approximation ratios.     

Truthful approximation mechanisms for restricted combinatorial auctions

When attempting to design a truthful mechanism for a computationally hard problem such as combinatorial auctions, one is faced with the problem that most efficiently computable heuristics can not be embedded in any truthful mechanism (e.g. VCG-like payment rules will not ensure truthfulness).We develop a set of techniques that allow constructing efficiently computable truthful mechanisms for combinatorial auctions in the special case where each bidder desires a specific known subset of items and only the valuation is unknown by the mechanism (the single parameter case). For this case we extend the work of Lehmann, O'Callaghan, and Shoham, who presented greedy heuristics. We show how to use If-Then-Else constructs, perform a partial search, and use the LP relaxation. We apply these techniques for several canonical types of combinatorial auctions, obtaining truthful mechanisms with provable approximation ratios.     

Dominant Strategy Adoption and Bidders' Experience with Pricing Rules

Truthful revelation is a dominant strategy in both English (oral ascending bid) and second-price sealed-bid private-values auctions. Controlled observations of English auctions are largely consistent with the dominant strategy prediction, but laboratory second-price auctions exhibit substantial and persistent overbidding, even with prior experience. However, the experience of having bid in an English auction has a significant learning effect, moving bidding in subsequent second-price auctions closer to the dominant strategy. I explore two treatments isolating facets of the lessons learned from English auction participation, leading me to the following conclusions. Part of the lesson carried over appears to be considering prices one-by-one, but most of it appears to be a crude awareness that overbidding leads to losses. A claim that English auction experience teaches subjects to recognize the dominant strategy in second-price auctions seems overly optimistic. I introduce a nonparametric technique to test coefficient restrictions when the assumption of normally distributed errors is untenable.     

Does spectrum auctioning harm consumers? Lessons from 3G licensing

Although the auctioning spectrum is generally considered to be highly successful, many countries still rely on beauty contests to assign spectrums. This is often attributed to the negative perceptions about the potential problems that auctions may cause, such as high licensing fees, high consumer prices, a lower incentive to invest in infrastructure, and concerns about market concentration.To address these negative perceptions, this paper estimates the effects of the auctions and the licensing fees for the 3G spectrum on consumer prices, the timing of a new service launch, and the market structure using data from the mobile markets of 21 OECD countries. Although our study uses a relatively small sample and a simple methodology, the results are meaningful since it examines a single service (3G) in OECD countries. Some of these countries have adopted auctions while others have used the traditional beauty contest approach. This combination provides a natural experiment to evaluate the impact of auctions on the mobile telecommunications market.The estimation results show no evidence to support claims of negative effects of spectrum auctions in the mobile communications market. This study calls for more positive action toward spectrum auctions in many countries who seek to improve the efficiency and transparency of spectrum assignment.     

BIDS AND COSTS IN COMBINATORIAL AND NONCOMBINATORIAL PROCUREMENT AUCTIONS—EVIDENCE FROM PROCUREMENT OF PUBLIC CLEANING CONTRACTS

Combinatorial procurement auctions enable suppliers to pass their potential cost synergies on to the procuring entity and may therefore lead to lower costs and enhance efficiency. However, bidders might find it profitable to inflate their stand‐alone bids in order to favor their package bids. Using data from standard and combinatorial procurement auctions, we find that bids on individual contracts in simultaneous standard auctions without the option to submit package bids are significantly lower than the corresponding stand‐alone bids in combinatorial auctions. Further, no significant difference in procurer's cost as explained by auction format is found. (JEL D44, H57, L15)     

Competition among auctioneers in large markets

We analyse a multistage game of competition among auctioneers. First, the auctioneers commit to some reserve prices; second, the bidders enter one auction, if any; and finally, the auctions take place. We show that for any finite set of feasible reserve prices, each auctioneer announces a reserve price equal to his production cost if the numbers of auctioneers and bidders are sufficiently large, though finite. Our result supports the idea that optimal auctions may be quite simple. Our model also confirms previous results for some “limit” versions of the model by McAfee (Econometrica 61 (1993) 1281-1312), Peters (Rev. Econ. Stud. 64 (1997) 97-123), and Peters and Severinov (J. Econ. Theory 75 (1997) 141-179).     

Auction design and auction outcomes

We study the impact of spectrum auction design on the prices paid by telecommunications operators for two decades across 85 countries. Our empirical strategy combines information about competition in the local market, the level of adoption and a wide range of socio-economic indicators and process specific variables. Using a micro dataset of almost every mobile spectrum auction performed so far—both regional and national—we show that auction design affects final prices paid. Two designs (SMRA with augmented switching and CCA with core pricing) result in auctions with systematically higher normalized returns. Further, we document that spectrum ownership appears to affect prices paid in subsequent auctions. We discuss the mechanisms of cost minimization and foreclosure faced by operators in different regulatory environments. Our findings have implications for policy-makers and regulators.     

Auctions with Price-Proportional Benefits to Bidders

After some auctions, including Amish estate sales and buyer rings′ knockout auctions, each bidder receives a share of the revenue generated by the auction. We show that in the symmetric case, equilibrium bids in both first-price sealed-bid auctions and oral auctions increase as each bidder′s share increases. In the case of independent signals, oral auctions result in higher expected equilibrium prices than do first-price sealed-bid auctions. Journal of Economic, Literature classification number: D44.     

Robustness of the Incentive Compatible Combinatorial Auction

Goods are said to be combinatorial when the value of a bundle of goods is not equal to the sum of the values of the same goods unbundled. Investigations of combinatorial allocation problems should recognize that there are two separate aspects of such problems: anenvironmental distinction between multiple-unit allocation problems which involve combinatorial goods and those which do not do so, and aninstitutional distinction between auctions in which combinatorial values can be expressed as part of the bidding rules and those in which they cannot. Forsythe and Isaac (Research in Experimental Economics, Vol. 2 (1982). Greenwich, Conn.: JAI Press, Inc.) reports the extension of the Vickrey auction into a demand-revealing, multiple unit, private goods auction that can incorporate combinatorial values. This current paper places that theoretically demand-revealing institution in a series of experimental environments in order to generate results (e.g. efficiencies) which may serve as a benchmark for other auctions (combinatorial or otherwise) whose implementation characteristics may be more favorable. To aid in interpretation of our Vickrey experimental results, we also provide results of alternatives to Vickrey allocations from both institutional and heuristic sources, as well as a discussion of the source of the Vickrey auctions high efficiencies even in the presence of misrevelation.     

Imperfect Competition in Auction Designs

We study the competition between two owners of identical goods who wish to sell them to a pool of potential buyers. The sellers compete simultaneously setting reserve prices for their second price sealed bid auctions. Upon observing the set reserve prices, the buyers decide simultaneously in which auction to bid. We show that this game has (at least) one equilibrium and that all equilibria are inefficient: reserve prices are not driven to zero (cost). We also discuss where and why the parallel between optimal auction design and optimal pricing in the case of monopoly breaks down for oligopoly.     

建筑业招投标中“平均价中标”的实验研究

本文通过实验室实验研究私人独立价值（IPV）假定和共同价值（CV）假定下平均价中标的拍卖。无投标限价时,IPV拍卖的报价迅速收敛至前期平均价,而CV拍卖的报价并未有明显的收敛趋势。有投标限价时,CV拍卖的报价均收敛于投标限价,报价的波动几乎与投标限价的起伏重合,而IPV拍卖的报价却没有随投标限价的起伏而有大幅的波动,仍收敛至前期的平均价格。IPV拍卖的平均报价或中标价格和中标企业的成本没有很大的联系,平均价中标几乎不能配置资源至成本最低的企业。无投标限价CV拍卖虽然避免了“赢家诅咒”问题,但报价普遍偏高;而设立较低的投标限价虽可能降低价格,但和最低价中标拍卖一样,不可避免遭遇“赢家诅咒”问题,同时投标限价很容易成为竞拍者协调报价的共同信息。