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An equilibrium analysis of the simultaneous ascending auction

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  • Jacob K. Goeree
  • Yuanchuan Lien

Abstract

We analyze the dynamic simultaneous ascending auction (SAA), which was pioneered by the US Federal Communications Commission (FCC) in 1994 and has since become the standard to conduct large-scale, large-stakes spectrum auctions around the world. We consider an environment where local bidders, each interested in a single item, compete against one or more global bidders with super-additive values for combinations of items. In the SAA, competition takes place on an item-by-item basis, which creates an exposure problem for global bidders - when competing aggressively for a package, a global bidder may incur a loss when winning only a subset. We characterize the Bayes-Nash equilibria of the SAA, evaluate the impact of the exposure problem on revenue and efficiency, and compare its performance to that of the benchmark Vickrey-Clarke-Groves (VCG) mechanism. We show that individual and social incentives are aligned in the SAA in the sense that bidders' drop-out levels maximize expected welfare. Unlike the VCG mechanism, however, the SAA is not fully efficient because when a bidder drops out, information about others' values has been only partially revealed. Like the VCG mechanism, the SAA exhibits perverse revenue properties: due to the exposure problem, the SAA may result in non-core outcomes where local bidders obtain items at very low prices, and seller revenue can be decreasing in the number of bidders. Moreover, the SAA may result in lower revenues than the VCG mechanism. Finally, when the number of items grows large, the SAA and VCG mechanisms become (efficiency and revenue) equivalent.

Suggested Citation

  • Jacob K. Goeree & Yuanchuan Lien, 2009. "An equilibrium analysis of the simultaneous ascending auction," IEW - Working Papers 428, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:428
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    Cited by:

    1. repec:eee:telpol:v:42:y:2018:i:4:p:315-322 is not listed on IDEAS
    2. Gretschko, Vitali & Bichler, Martin & Janssen, Maarten, 2016. "Bargaining in Spectrum Auctions: A Review of the German Auction in 2015," Annual Conference 2016 (Augsburg): Demographic Change 145809, Verein für Socialpolitik / German Economic Association.
    3. repec:eee:telpol:v:41:y:2017:i:5:p:325-340 is not listed on IDEAS
    4. Sano, Ryuji, 2012. "Non-bidding equilibrium in an ascending core-selecting auction," Games and Economic Behavior, Elsevier, vol. 74(2), pages 637-650.
    5. repec:eee:telpol:v:42:y:2018:i:1:p:91-105 is not listed on IDEAS
    6. Hikmet Gunay & Xin Meng, 2012. "Exposure Problem in Multi-unit Auctions," ISER Discussion Paper 0848, Institute of Social and Economic Research, Osaka University.
    7. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, University of Exeter, Department of Economics.
    8. Rosa, Benjamin, 2019. "Bid Credits in Simultaneous Ascending Auctions," MPRA Paper 96895, University Library of Munich, Germany.
    9. Kemal Guler & Martin Bichler & Ioannis Petrakis, 2016. "Ascending Combinatorial Auctions with Risk Averse Bidders," Group Decision and Negotiation, Springer, vol. 25(3), pages 609-639, May.
    10. repec:the:publsh:3203 is not listed on IDEAS
    11. Bichler, Martin & Goeree, Jacob K., 2017. "Frontiers in spectrum auction design," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 372-391.
    12. repec:eee:gamebe:v:111:y:2018:i:c:p:20-40 is not listed on IDEAS
    13. repec:eee:indorg:v:52:y:2017:i:c:p:165-187 is not listed on IDEAS
    14. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    15. Janssen, Maarten & Kasberger, Bernhard, 2019. "On the clock of the combinatorial clock auction," Theoretical Economics, Econometric Society, vol. 14(4).
    16. Kittsteiner, Thomas & Ott, Marion & Steinberg, Richard, 2017. "Competing Combinatorial Auctions," EconStor Preprints 171995, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    Simultaneous ascending auction; exposure problem; auction design;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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