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Hierarchical package bidding: a paper & pencil combinatorial auction


Goeree, Jacob K; Holt, Charles A (2010). Hierarchical package bidding: a paper & pencil combinatorial auction. Games and Economic Behavior, 70(1):146-169.

Abstract

We introduce a new combinatorial auction format based on a simple, transparent pricing mechanism tailored for the hierarchical package structure proposed by Rothkopf, Peke~c, and Harstad (1998) to avoid computational complexity. This combination provides the feedback necessary for bidders in multi-round auctions to discern winning bidding strategies for subsequent rounds and to coordinate responses to aggressive package bids. The resulting mechanism is compared to two leading alternatives in a series of laboratory experiments involving varying degrees of value synergies. Based on these 'wind tunnel' tests the FCC has decided to use hierarchical package bidding in the major upcoming 700MHz auction.

Abstract

We introduce a new combinatorial auction format based on a simple, transparent pricing mechanism tailored for the hierarchical package structure proposed by Rothkopf, Peke~c, and Harstad (1998) to avoid computational complexity. This combination provides the feedback necessary for bidders in multi-round auctions to discern winning bidding strategies for subsequent rounds and to coordinate responses to aggressive package bids. The resulting mechanism is compared to two leading alternatives in a series of laboratory experiments involving varying degrees of value synergies. Based on these 'wind tunnel' tests the FCC has decided to use hierarchical package bidding in the major upcoming 700MHz auction.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2010
Deposited On:18 Jan 2011 14:42
Last Modified:05 Apr 2016 14:36
Publisher:Elsevier
ISSN:0899-8256
Publisher DOI:https://doi.org/10.1016/j.geb.2008.02.013

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