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Simultaneous Ascending Auctions with Package Bidding

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Abstract

An effective package bidding mechanism addresses three problems: the exposure problem (the risks a bidder faces in trying to construct an efficiently large combination of licenses), the free-rider problem (the difficulties small bidders have in beating those who bid for larger packages of licenses), and the computational complexity problem (which arises from the fact that the number of possible combinations of licenses is much larger than the number of licenses). Package bidding offers the possibility of an improvement over individual-license bidding only when there are strong complementarities and the pattern of those complementarities varies across bidders. Package bidding works satisfactorily only when the auction rules have been carefully designed to manage all three problems.

Suggested Citation

  • Peter Cramton & John McMillan & Paul Milgrom & Bradley Miller & Bridger Mitchell & Daniel Vincent & Robert Wilson, 1998. "Simultaneous Ascending Auctions with Package Bidding," Papers of Peter Cramton 98cra2, University of Maryland, Department of Economics - Peter Cramton.
  • Handle: RePEc:pcc:pccumd:98cra2
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    File URL: http://www.cramton.umd.edu/papers1995-1999/98cra-simultaneous-ascending-auctions-with-package-bidding.pdf
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    Keywords

    Auctions; Spectrum Auctions; Multiple-Round Auctions; Efficiency;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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