In multiple-object environments where individual bidders may demand more than one object, standard methods of auction generally result in allocative inefficiency. This paper proposes a new ascending-bid method for auctioning homogeneous goods, such as Treasury bills or communications spectrum. The auctioneer announces a current price, bidders report back the quantity demanded at that price, and the auctioneer raises the price. Objects are awarded to bidders at the current price whenever they are “clinched, ” and the process continues until the market clears. With pure private values, the proposed (dynamic) auction yields the same outcome as the (sealed-bid) Vickrey auction, but may be simpler for bidders to understand and has the advantage of assuring the privacy of the upper portions of bidders ’ demand curves. With interdependent values, the proposed auction may still yield efficiency, whereas the Vickrey auction fails due to a problem which could be described as the “Generalized Winner’s Curse.” JEL No.: D44 (Auctions)

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Auction theory has recently investigated the demand-reduction incentives and potential inefficient allocations of multi-unit uniform-price auctions, such as those used by the U.S. Treasury for debt sales. Recent experimental results show that bidders do indeed strategically reduce their bids in uniform-price auctions. The present paper extends this area of research, both theoretically and experimentally, to consider the effects of varying the number of bidders. We derive several theoretical predictions, including: i) demand reduction should decrease with an increase in the number of bidders and ii) considerable demand reduction remains even in the asymptotic limit, although truthful bidding yields profits very close to those of equilibrium play. We empirically test our theory by examining bidding behavior of subjects in an actual marketplace, where we auction dozens of sportscards using both uniform-price and Vickrey auction formats. The field data are broadly consistent with the theoretical predictions of our model: most notably, demand reduction becomes much smaller and harder to detect as the number of bidders increases. JEL Classification: D44 (auctions), C93 (Field Experiments)

Many auctions involve the sale of a variety of distinct assets. Examples are airport time slots, delivery routes, network routing and furniture. Because of complementarities or substitution effects between the different assets, bidders have preferences not just for particular items but for sets of items. For this reason, economic efficiency is enhanced if bidders are allowed to bid on bundles or combinations of different assets. This note outlines some of the underlying theory and identifies some research questions. The reader interested in more details on research in this are should consult the survey paper by de Vries and myself on combinatorial auctions. I am greatful for useful conversations with Sushil Bikhchandani, Sven de Vries, Peter Eso,

FCC spectrum auctions sell licenses to provide mobile phone service in designated geographic territories. We empirically measure efficiency in the C block auction, where the continental US was split into 480 licenses, which differs from a common European system of awarding nationwide licenses. Spectrum auctions can be inefficient because of demand reduction and intimidatory collusion. Unfortunately, there is no one standard model of spectrum auctions. In the spirit of Haile and Tamer (2003), we structurally estimate bidder valuations using a necessary condition for equilibrium behavior known as pairwise stability. Pairwise stability holds across a set of spectrum auction models, including models with intimidatory collusion and demand reduction. Using our valuation estimates, we find that the allocation of licenses in the C block was inefficient compared to awarding four large regional licenses to the largest bidders.

Invited Paper for Production and Operations Management Customer behavior modeling has been gaining increasing attention in the operations man-agement community. In this paper we review current models of customer behavior in the revenue management and auction literatures and suggest several interesting research directions in this area. 1

We present laboratory experiments of different multi-unit auction mechanisms. Two units of a homogeneous object were auctioned off among two bidders with flat demand for two units. We test whether expected demand reduction occurs in open and sealed–bid uniform–price auctions. Revenue equivalence is tested for these auctions as well as for the Ausubel, the Vickrey and the discriminatory sealed–bid auction. Furthermore, we compare the five mechanisms with respect to the efficient allocation of the units. We also provide some theoretical insights concerning the equilibria of uniform–price auctions with incomplete information.

We study two package auction mechanisms in a laboratory setting, a sealed bid Vickrey auction and an ascending version of Vickrey, the iBEA auction. Unlike the single-unit Vickrey auction, where bidders tend to overbid in the laboratory, most of our bidders either underbid or bid their true values. Furthermore, at the aggregate level, Vickrey generates significantly higher revenue and efficiency than iBEA. We also find that human bidders learn from their robot opponents when the robot strategies are (myopic) best responses.

The economic literature on online auctions is rapidly growing, because the enormous amount of freely available field data and the emergence of numerous innovative auction design features on auction platforms such as eBay have created excellent research opportunities. In this article, we survey the theoretical, empirical and experimental research on bidding strategies (including the timing of bids and winner’s curse effects) and seller strategies (including reserve price policies and the use of buy-now options) in online auctions, as well as some of the literature dealing with online auction design (including the stopping rule and multi-object auction rules). Section 1: Why do information systems make auctions (even) more popular? Long before any electronic information systems were in place, people used auctions to trade all kinds of goods and services. In his comprehensive overview of the history of auctions, Cassady (1967) reports auctions of items of almost any size, from jewels and spices to ships and provinces. The range of services that have been auctioned is also enormous, including anything from a dance on a local church festivity to the lifetime work force of a slave. While being widespread, however, auctions were not the most common way of trading because the costs of conducting and participating in an auction were typically too high for the every-day trade of common goods. Evidently, the use of auctions is subject to the trade-off between the advantage of price discovery (i.e. discovering the highest valuation bidder) and the disadvantage of having high transaction costs (i.e. the costs of finding a buyer and negotiating a sale). Because of this, auctions are most valuable when the party running the auction (both in buy and sell auctions) is

Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and e ¢ ciency, while entrants’chances are similar across the two formats.