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Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis

  • John H. Kagel
  • Yuanchuan Lien
  • Paul Milgrom

We use theory and experiment to explore the performance of multi-round, price-guided, combinatorial auctions. We define efficiency-relevant and core-relevant packages and show that if bidders bid aggressively on these and losing bidders bid to their limits, then the auction leads to efficient or core allocations. We study the theoretically relevant behaviors and hypothesize that subjects will make only a few significant bids, and that certain simulations with auto-bidders will predict variations in performance across different environments. Testing the combinatorial clock auction (CCA) design, we find experimental support for these two hypotheses. We also compare the CCA to a simultaneous ascending auction. (JEL D44)

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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 2 (2010)
Issue (Month): 3 (August)
Pages: 160-85

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Handle: RePEc:aea:aejmic:v:2:y:2010:i:3:p:160-85
Note: DOI: 10.1257/mic.2.3.160
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  1. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
  2. Liad Blumrosen & Noam Nisan, 2005. "On the Computational Power of Iterative Auctions I: Demand Queries," Discussion Paper Series dp381, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  3. Nisan, Noam & Segal, Ilya, 2006. "The communication requirements of efficient allocations and supporting prices," Journal of Economic Theory, Elsevier, vol. 129(1), pages 192-224, July.
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