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Quadratic Core-Selecting Payment Rules for Combinatorial Auctions

Author

Listed:
  • Robert W. Day

    (Operations and Information Management, School of Business, University of Connecticut, Storrs, Connecticut 06269)

  • Peter Cramton

    (Economics Department, University of Maryland, College Park, Maryland 20742)

Abstract

We report on the use of a quadratic programming technique in recent and upcoming spectrum auctions in Europe. Specifically, we compute a unique point in the core that minimizes the sum of squared deviations from a reference point, for example, from the Vickrey-Clarke-Groves payments. Analyzing the Karush-Kuhn-Tucker conditions, we demonstrate that the resulting payments can be decomposed into a series of economically meaningful and equitable penalties. Furthermore, we discuss the benefits of this combinatorial auction, explore the use of alternative reserve pricing approaches in this context, and indicate the results of several hundred computational runs using CATS data.

Suggested Citation

  • Robert W. Day & Peter Cramton, 2012. "Quadratic Core-Selecting Payment Rules for Combinatorial Auctions," Operations Research, INFORMS, vol. 60(3), pages 588-603, June.
    • Handle: RePEc:inm:oropre:v:60:y:2012:i:3:p:588-603
    DOI: 10.1287/opre.1110.1024
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    References listed on IDEAS

    as
    1. Lawrence M. Ausubel & Peter Crampton & Paul Milgrom, 2004. "The Clock-Proxy Auction: A Practical Combinatorial Auction Design," Discussion Papers 03-034, Stanford Institute for Economic Policy Research.
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    More about this item

    Keywords

    games; group decisions; bidding; auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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