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Hierarchical package bidding: A paper & pencil combinatorial auction

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  • Goeree, Jacob K.
  • Holt, Charles A.

Abstract

We introduce a new combinatorial auction format based on a simple, transparent pricing mechanism tailored for the hierarchical package structure proposed by Rothkopf, Pekec, and Harstad to avoid computational complexity [Rothkopf, M., Pekec, A., Harstad, R., 1998, Computationally manageable combinatorial auctions. Manage. Sci. 44, 1131-1147]. 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 a segment of the upcoming 700 MHz auction.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 70 (2010)
Issue (Month): 1 (September)
Pages: 146-169

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Handle: RePEc:eee:gamebe:v:70:y:2010:i:1:p:146-169

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: FCC spectrum auctions Package bidding Experiments;

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Cited by:
  1. Larson, Nathan & Elmaghraby, Wedad, 2008. "Procurement auctions with avoidable fixed costs: an experimental approach," MPRA Paper 32163, University Library of Munich, Germany, revised 2011.
  2. Chernomaz, Kirill & Levin, Dan, 2012. "Efficiency and synergy in a multi-unit auction with and without package bidding: An experimental study," Games and Economic Behavior, Elsevier, vol. 76(2), pages 611-635.

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