Combinatorial auction design

Abstract

Combinatorial auctions allow for more expressive bidding in which participants can submit package bids with logical constraints that limit allowable outcomes. This type of auction can be useful when participants' values are complementary or when participants have production and financial constraints. However, combinatorial auctions are currently rare in practice. The main problems confronted in implementing these auctions are that they have computational uncertainty (i.e., there is no guarantee that the winning bids for such an auction can be found in a ''reasonable'' amount of time when the number of bidders and items becomes larger) and that the auction is cognitively complex and can lead participants to pursue perverse bidding strategies. This article describes a type of combinatorial auction that, during laboratory testing, eliminated these problems and produced extremely efficient outcomes.

The design, testing and implementation of Virginia’s NOx allowance auction

“…Instead, it uses a clock to quote successive prices, and each bidder is required only to indicate his quantity demanded at the standing price. (McCabe et al, 1988(McCabe et al, /1991also see: McCabe et al, 1990;Cramton and Kerr, 2002;Porter et al, 2003;and Banks et al, 2003 who discuss the chaotic problems created in the absence of an English clock auction).…”

Do core-selecting Combinatorial Clock Auctions always lead to high efficiency? An experimental analysis of spectrum auction designs

“…The design of such auctions, however, led to a number of fundamental problems, and many theoretical and experimental contributions during the past ten years (Cramton et al, 2006b). The existing experimental literature comparing SMRAs and CAs suggests that in the presence of significant complementarities in bidders' valuations and a setting with independent private and quasi-linear valuations, combinatorial auctions achieve higher efficiency than simultaneous auctions (Banks et al, 1989;Ledyard et al, 1997;Porter et al, 2003;Kwasnica et al, 2005;Brunner et al, 2010;Goeree and Holt, 2010). Since 2008 several countries such as the U.K., Ireland, the Netherlands, Denmark, Austria, Switzerland, and the U.S. have adopted combinatorial auctions for selling spectrum rights (Cramton, 2009b).…”

Combinatorial Market Processing for Multilateral Coordination

“…The second framework uses multiple rounds of sealed bid formats, which solves repeated integer programming problems. In general, auction systems that provide feedback and allow bidders to revise their bids seem to produce more efficient outcomes [125].…”

“…The Federal Communications Commission auctions of wireless communication licenses were different because of complementarities between the different licenses. These economic environments have been described as combined value auctions and were experimentally investigated in the context of airline slot allocation [129], payloads for NASA's Space Station [13], tracking routes [126], pollution license trading, and spectrum auctions [96,123,125]. Further applications are discussed in [164].…”