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

Abstract

For many years the Simultaneous Multi-Round Auction (SMRA) has been the primary auction design for spectrum sales worldwide. Recently, the core-selecting Combinatorial Clock Auction (CCA) has been used as an alternative to the SMRA in a number of countries promising strong incentives for truthful bidding and high efficiency as a result. We analyze the efficiency and auctioneer revenue of the CCA in comparison to SMRA and examine bidding behavior in both formats. The experiments are based on two value models, which resemble single-and multiband spectrum sales in the field. Such applications often allow for thousands of possible bundles. Bidders in the CCA submitted bids for only a fraction of all bundles with a positive valuation. Bundles were selected based on synergies and payoff after the primary bid rounds. As a consequence, we found efficiency of the CCA to be significantly lower than that of SMRA in the multi-band value model and auctioneer revenue of the CCA to be lower in both value models. In addition, we characterize several properties of the auction format, which result from the two-stage design and the payment and activity rules.

Collusion in Multi-Object Auctions: Experimental Evidence

“…This holds true especially for auctions with a high volume of goods for sale. This statement is supported not only by our research, but also by Bichler et al (2013). Moreover, Bichler et al (2014) further state that the efficiency of simple auction formats increases with high volumes of goods in stock.…”

“…In addition, all formats in their setting had different results in terms of efficiency as well as sellers' revenue. (Bichler et al, 2013) cast doubt on mainstream literature results mentioned above and provide results favoring the combinatorial auction formats in efficiency. They compare the Combinatorial Clock auction to SMR.…”

“…Such market structure can be found in various countries and industries and was modelled for example in experiments done by Bichler et al (2013) or by Abbink et al (2005) who used two symmetric tetrads of bidders in their experiments. For each player-type, its valuations of goods were randomly drawn from a publicly known interval (the same interval for all players so there was an ex-ante symmetrical setting for each auctioned goods) prior to the experiment only once.…”

“…Payoffs from all treatments were on average 400 CZK per subject. Brunner et al (2010) or even Bichler et al (2013). This was mainly due to the necessity of high over-recruitment rates in the case of such training and highly constrained funding of the research.…”

The Endgame of Telecommunications Policy? A Survey

“…This is done through a two-step auction design, where in the first step the quantity of spectrum is allocated to winning bidders and in the second step the exact frequencies are assigned. While Cramton argues that the combinatorial auction format saves time and haggling for the allocation of bands to uses, there is experimental evidence that combinatorial clock auctions are too complicated for the bidders (BICHLER, SHABALIN and WOLF 2013). This would preclude the theoretical efficiency gains from actually being realized.…”