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On the impact of package selection in combinatorial auctions: an experimental study in the context of spectrum auction design

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  • Tobias Scheffel

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  • Georg Ziegler

    ()

  • Martin Bichler

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Abstract

Combinatorial auctions have been studied analytically for several years, but only limited experimental results are available for auctions with more than 10 items. We investigate the Hierarchical Package Bidding auction (HPB), the Combinatorial Clock auction (CC), and one pseudo-dual price auction (PDP) experimentally, as all these formats were used or suggested for high-stakes spectrum auctions. We want to understand the impact that different auction formats have on bidder behavior and allocative efficiency. Interestingly, we find that the main source of inefficiency in all formats is the bidders’ preselection of packages, rather than their strategies or auction rules; bidders mostly preselect a small number of packages of interest early in the auction. CC achieves high efficiency and revenue in all experiments, but HPB yields similar results even in value models, where hierarchical pre-packaging is difficult. Due to their influence on the decision of the US Federal Communications Commission, we intentionally repeated a set of experiments conducted by Goeree and Holt (GH) [Games and Economic Behavior 70:146–169, 2010 ], and find similar aggregate results. In addition, we analyze the CC auction and find that this mechanism has advantages in environments where the auctioneers’ hierarchy does not fit the bidders’ preferences well. In addition to the value models with global synergies in GH, we used value models where bidders have local synergies, which play a significant role in spectrum auctions in the field and lead to different results. Copyright Economic Science Association 2012

Suggested Citation

  • Tobias Scheffel & Georg Ziegler & Martin Bichler, 2012. "On the impact of package selection in combinatorial auctions: an experimental study in the context of spectrum auction design," Experimental Economics, Springer;Economic Science Association, vol. 15(4), pages 667-692, December.
  • Handle: RePEc:kap:expeco:v:15:y:2012:i:4:p:667-692
    DOI: 10.1007/s10683-012-9321-0
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christian Kroemer & Martin Bichler & Andor Goetzendorff, 2016. "(Un)expected Bidder Behavior in Spectrum Auctions: About Inconsistent Bidding and Its Impact on Efficiency in the Combinatorial Clock Auction," Group Decision and Negotiation, Springer, vol. 25(1), pages 31-63, January.
    2. M. S. Iftekhar & A. Hailu & R. K. Lindner, 2014. "Does It Pay to Increase Competition in Combinatorial Conservation Auctions?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(3), pages 411-433, September.
    3. Kagel, John H. & Lien, Yuanchuan & Milgrom, Paul, 2014. "Ascending prices and package bidding: Further experimental analysis," Games and Economic Behavior, Elsevier, vol. 85(C), pages 210-231.
    4. Iftekhar, Md Sayed & Tisdell, John G., 2015. "Bidding and performance in multiple unit combinatorial fishery quota auctions: Role of information feedbacks," Marine Policy, Elsevier, vol. 62(C), pages 233-243.
    5. Heczko, Alexander & Kittsteiner, Thomas & Ott, Marion, 2018. "The Performance of Core-Selecting Auctions: An Experiment," EconStor Preprints 176842, ZBW - German National Library of Economics.
    6. Vangerven, Bart & Goossens, Dries R. & Spieksma, Frits C.R., 2017. "Winner determination in geometrical combinatorial auctions," European Journal of Operational Research, Elsevier, vol. 258(1), pages 254-263.
    7. Martin Bichler & Pasha Shabalin & Jürgen Wolf, 2013. "Do core-selecting Combinatorial Clock Auctions always lead to high efficiency? An experimental analysis of spectrum auction designs," Experimental Economics, Springer;Economic Science Association, vol. 16(4), pages 511-545, December.

    More about this item

    Keywords

    Auctions; Lab experiments; Group behavior; Individual behavior; C91; C92; D44;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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