'The Cost of Simple Bidding in Combinatorial Auctions'
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Pricing Rule in a Clock Auction
Decision Analysis informs ® Vol. 7, No. 1, March 2010, pp. 40–57 issn 1545-8490 eissn 1545-8504 10 0701 0040 doi 10.1287/deca.1090.0161 © 2010 INFORMS Pricing Rule in a Clock Auction Peter Cramton, Pacharasut Sujarittanonta Department of Economics, University of Maryland, College Park, Maryland 20742 {[email protected], [email protected]} e analyze a discrete clock auction with lowest-accepted-bid (LAB) pricing and provisional winners, as Wadopted by India for its 3G spectrum auction. In a perfect Bayesian equilibrium, the provisional winner shades her bid, whereas provisional losers do not. Such differential shading leads to inefficiency. An auction with highest-rejected-bid (HRB) pricing and exit bids is strategically simple, has no bid shading, and is fully efficient. In addition, it has higher revenues than the LAB auction, assuming profit-maximizing bidders. The bid shading in the LAB auction exposes a bidder to the possibility of losing the auction at a price below the bidder’s value. Thus, a fear of losing at profitable prices may cause bidders in the LAB auction to bid more aggressively than predicted, assuming profit-maximizing bidders. We extend the model by adding an anticipated loser’s regret to the payoff function. Revenue from the LAB auction yields higher expected revenue than the HRB auction when bidders’ fear of losing at profitable prices is sufficiently strong. This would provide one explanation why India, with an expressed objective of revenue maximization, adopted the LAB auction for its upcoming 3G spectrum auction, rather than the seemingly superior HRB auction. Key words: auctions; clock auctions; spectrum auctions; behavioral economics; market design History: Received on April 16, 2009. -
Integrating the Structural Auction Approach and Traditional Measures of Market Power
Integrating the Structural Auction Approach and Traditional Measures of Market Power Emílio Tostão Department of Agricultural Economics Oklahoma State University 535 Ag. Hall, Stillwater, OK 74078-6026 Email: [email protected] Chanjin Chung Department of Agricultural Economics Oklahoma State University 322 Ag. Hall, Stillwater, OK 74078-6026 Email: [email protected] B. Wade Brorsen Department of Agricultural Economics Oklahoma State University 414 Ag. Hall, Stillwater, OK 74078-6026 Email: [email protected] Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Long Beach, California, July 23-26, 2006. Copyright by Emílio Tostão , Chanjin Chung, and B . Wade Brorsen . All rights reserved . Readers may make verbatim copies of this document for non commercial purposes by any means , provided that this copyright notice appears on all such copies . 1 Integrating the Structural Auction Approach and Traditional Measures of Market Power Abstract This study asks the question, what is the relationship between traditional models of market power and structural auction models? An encompassing model is derived that considers both price markdowns due to bid shading during an auction and price markdowns at the industry-level due to imperfect competition. Data from a cattle procurement experimental market is used to compare the appropriateness of the two alternative theories. Regression results show that while the number of firms is more important than the number of bidders on lot of cattle in explaining pricing behavior in the game, the number of bidders does contain some unique information and should be included in the model. Both the traditional NEIO and structural auction approaches overestimated the true markdowns possibly due to failure to account for the winners curse. -
Putting Auction Theory to Work
Putting Auction Theory to Work Paul Milgrom With a Foreword by Evan Kwerel © 2003 “In Paul Milgrom's hands, auction theory has become the great culmination of game theory and economics of information. Here elegant mathematics meets practical applications and yields deep insights into the general theory of markets. Milgrom's book will be the definitive reference in auction theory for decades to come.” —Roger Myerson, W.C.Norby Professor of Economics, University of Chicago “Market design is one of the most exciting developments in contemporary economics and game theory, and who can resist a master class from one of the giants of the field?” —Alvin Roth, George Gund Professor of Economics and Business, Harvard University “Paul Milgrom has had an enormous influence on the most important recent application of auction theory for the same reason you will want to read this book – clarity of thought and expression.” —Evan Kwerel, Federal Communications Commission, from the Foreword For Robert Wilson Foreword to Putting Auction Theory to Work Paul Milgrom has had an enormous influence on the most important recent application of auction theory for the same reason you will want to read this book – clarity of thought and expression. In August 1993, President Clinton signed legislation granting the Federal Communications Commission the authority to auction spectrum licenses and requiring it to begin the first auction within a year. With no prior auction experience and a tight deadline, the normal bureaucratic behavior would have been to adopt a “tried and true” auction design. But in 1993 there was no tried and true method appropriate for the circumstances – multiple licenses with potentially highly interdependent values. -
GAF: a General Auction Framework for Secure Combinatorial Auctions
GAF: A General Auction Framework for Secure Combinatorial Auctions by Wayne Thomson A thesis submitted to the Victoria University of Wellington in fulfilment of the requirements for the degree of Master of Science in Computer Science. Victoria University of Wellington 2013 Abstract Auctions are an economic mechanism for allocating goods to interested parties. There are many methods, each of which is an Auction Protocol. Some protocols are relatively simple such as English and Dutch auctions, but there are also more complicated auctions, for example combinatorial auctions which sell multiple goods at a time, and secure auctions which incorporate security solutions. Corresponding to the large number of pro- tocols, there is a variety of purposes for which protocols are used. Each protocol has different properties and they differ between how applicable they are to a particular domain. In this thesis, the protocols explored are privacy preserving secure com- binatorial auctions which are particularly well suited to our target domain of computational grid system resource allocation. In grid resource alloca- tion systems, goods are best sold in sets as bidders value different sets of goods differently. For example, when purchasing CPU cycles, memory is also required but a bidder may additionally require network bandwidth. In untrusted distributed systems such as a publicly accessible grid, secu- rity properties are paramount. The type of secure combinatorial auction protocols explored in this thesis are privacy preserving protocols which hide the bid values of losing bidder’s bids. These protocols allow bidders to place bids without fear of private information being leaked. With the large number of permutations of different protocols and con- figurations, it is difficult to manage the idiosyncrasies of many different protocol implementations within an individual application. -
Demand Reduction and Inefficiency in Multi-Unit Auctions
The Review of Economic Studies Advance Access published July 28, 2014 Review of Economic Studies (2014) 0, 1–35 doi:10.1093/restud/rdu023 © The Author 2014. Published by Oxford University Press on behalf of The Review of Economic Studies Limited. Demand Reduction and Inefficiency in Multi-Unit Auctions Downloaded from LAWRENCE M. AUSUBEL University of Maryland http://restud.oxfordjournals.org/ PETER CRAMTON University of Maryland MAREK PYCIA UCLA MARZENA ROSTEK University of Wisconsin-Madison at University of Wisconsin-Madison Libraries on October 27, 2014 and MAREK WERETKA University of Wisconsin-Madison First version received July 2010; final version accepted April 2014 (Eds.) Auctions often involve the sale of many related goods: Treasury, spectrum, and electricity auctions are examples. In multi-unit auctions, bids for marginal units may affect payments for inframarginal units, giving rise to “demand reduction” and furthermore to incentives for shading bids differently across units. We establish that such differential bid shading results generically in ex post inefficient allocations in the uniform-price and pay-as-bid auctions. We also show that, in general, the efficiency and revenue rankings of the two formats are ambiguous. However, in settings with symmetric bidders, the pay-as-bid auction often outperforms. In particular, with diminishing marginal utility, symmetric information and linearity, it yields greater expected revenues. We explain the rankings through multi-unit effects, which have no counterparts in auctions with unit demands. We attribute the new incentives separately to multi-unit (but constant) marginal utility and to diminishing marginal utility. We also provide comparisons with the Vickrey auction. Key words: Multi-Unit Auctions, Demand Reduction, Treasury Auctions, Electricity Auctions JEL Codes: D44, D82, D47, L13, L94 1. -
Spectrum Auctions from the Perspective of Matching
Spectrum Auctions from the Perspective of Matching Paul Milgrom and Andrew Vogt May 5, 2021 1 Introduction In July 1994, the United States Federal Communications Commission (FCC) conducted the first economist-designed auction for radio spectrum licenses. In the years since, governments worldwide have come to rely on auction mecha- nisms to allocate { and reallocate { rights to use electromagnetic frequencies. Over the same period, novel uses for spectrum have dramatically increased both the demand for licenses and auction prices, drawing continued attention to the nuances of spectrum markets and driving the development of spectrum auction design. In August 2017, the FCC completed the Broadcast Incentive Auction, a two-sided repurposing of an endogenously-determined quantity of spectrum that ranks among the most complex feats of economic engineering ever under- taken. The next generations of mobile telecommunications are poised to extend this growth, and to demand further innovation in the markets and algorithms that are used to assign spectrum licenses. What does all of this have to do with matching theory? Spectrum auctions differ from canonical matching problems in meaningful ways. Market designers often emphasize that a key element of matching markets is the presence of preferences on both sides of the market. In a marriage, for example, it is not enough that you choose your spouse; your spouse must also choose you. This two-sided choice structure applies also to matches between students and schools and between firms and workers, but not to matches between telecommunications companies and radio spectrum licenses. It is a different matching element that is often critically important in ra- dio spectrum auctions. -
CONFLICT and COOPERATION WITHIN an ORGANIZATION: a CASE STUDY of the METROPOLITAN WATER DISTRICT of SOUTHERN CALIFORNIA by DAVID
CONFLICT AND COOPERATION WITHIN AN ORGANIZATION: A CASE STUDY OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA by DAVID JASON ZETLAND B.A. (University of California, Los Angeles) 1991 M.S. (University of California, Davis) 2003 DISSERTATION Submitted in partial satisfaction of the requirements for the degree of DOCTOR OF PHILOSOPHY in Agricultural and Resource Economics in the OFFICE OF GRADUATE STUDIES of the UNIVERSITY OF CALIFORNIA DAVIS Committee in Charge 2008 Electronic copy available at: http://ssrn.com/abstract=1129046 Electronic copy available at: http://ssrn.com/abstract=1129046 Abstract Back in 1995, one member of a water co- did not change to reflect this scarcity, wa- operative announced it was going to buy wa- ter continued to be treated as a club good ter from an “outside” source. Other mem- when it should have been treated as a pri- bers of the cooperative did not like this idea, vate good. Because MET did not change its and a dispute broke out. After lawsuits, lob- policies for allocating water (take as much as bying and lopsided votes, peace of a sort was you need, at a fixed price, no matter where bought with 235 million dollars of taxpayer it is delivered), inefficiency increased. Argu- money and intense political pressure. Why ments over the policies increased inefficiency did this dispute happen? Was it exceptional even further. or typical? Is it possible that cooperative According to Hart and Moore (1996), members are not cooperative? These ques- cooperatives are efficient (relative to firms) tions are intrinsically interesting to students when members have reasonably homoge- of collective action, but they are more signif- nous preferences. -
Countering the Winner's Curse: Optimal Auction Design in a Common Value Model
Theoretical Economics 15 (2020), 1399–1434 1555-7561/20201399 Countering the winner’s curse: Optimal auction design in a common value model Dirk Bergemann Department of Economics, Yale University Benjamin Brooks Department of Economics, University of Chicago Stephen Morris Department of Economics, Massachusetts Institute of Technology We characterize revenue maximizing mechanisms in a common value environ- ment where the value of the object is equal to the highest of the bidders’ indepen- dent signals. If the revenue maximizing solution is to sell the object with proba- bility 1, then an optimal mechanism is simply a posted price, namely, the highest price such that every type of every bidder is willing to buy the object. If the object is optimally sold with probability less than 1, then optimal mechanisms skew the allocation toward bidders with lower signals. The resulting allocation induces a “winner’s blessing,” whereby the expected value conditional on winning is higher than the unconditional expectation. By contrast, standard auctions that allocate to the bidder with the highest signal (e.g., the first-price, second-price, or English auctions) deliver lower revenue because of the winner’s curse generated by the allocation. Our qualitative results extend to more general common value envi- ronments with a strong winner’s curse. Keywords. Optimal auction, common values, maximum game, posted price, re- serve price, revenue equivalence. JEL classification. C72, D44, D82, D83. 1. Introduction Whenever there is interdependence in bidders’ willingness to pay for a good, each bid- der must carefully account for that interdependence in determining how they should bid. A classic motivating example concerns wildcatters competing for an oil tract in a Dirk Bergemann: [email protected] Benjamin Brooks: [email protected] Stephen Morris: [email protected] We acknowledge financial support through National Science Foundation Grants SES 1459899 and SES 2001208. -
On the Existence of Equilibrium in Bayesian Games Without Complementarities
ON THE EXISTENCE OF EQUILIBRIUM IN BAYESIAN GAMES WITHOUT COMPLEMENTARITIES By Idione Meneghel and Rabee Tourky August 2019 Revised November 2019 COWLES FOUNDATION DISCUSSION PAPER NO. 2190R COWLES FOUNDATION FOR RESEARCH IN ECONOMICS YALE UNIVERSITY Box 208281 New Haven, Connecticut 06520-8281 http://cowles.yale.edu/ ON THE EXISTENCE OF EQUILIBRIUM IN BAYESIAN GAMES WITHOUT COMPLEMENTARITIES IDIONE MENEGHEL Australian National University RABEE TOURKY Australian National University Abstract. This paper presents new results on the existence of pure-strategy Bayesian equilibria in specified functional forms. These results broaden the scope of methods developed by Reny (2011) well beyond monotone pure strate- gies. Applications include natural models of first-price and all-pay auctions not covered by previous existence results. To illustrate the scope of our results, we provide an analysis of three auctions: (i) a first-price auction of objects that are heterogeneous and imperfect substitutes; (ii) a first-price auction in which bidders’ payoffs have a very general interdependence structure; and (iii) an all-pay auction with non-monotone equilibrium. Keywords: Bayesian games, monotone strategies, pure-strategy equilibrium, auctions. 1. Introduction Equilibrium behavior in general Bayesian games is not well understood. While there is an extensive literature on equilibrium existence, that literature imposes sub- stantive restrictions on the structure of the Bayesian game. In particular, previous existence results require some version of the following assumptions: (1) “weak quasi-supermodularity:” informally, the coordinates of a a player’s own action vector need to be complementary; and (2) “weak single-crossing:” informally, a player’s incremental returns of actions are nondecreasing in her types. -
An Optimal CO2 Saving Dispatch Model for Wholesale Electricity Market Concerning Emissions Trade
American Journal of Energy Engineering 2019; 7(1): 15-27 http://www.sciencepublishinggroup.com/j/ajee doi: 10.11648/j.ajee.20190701.13 ISSN: 2329-1648 (Print); ISSN: 2329-163X (Online) An Optimal CO 2 Saving Dispatch Model for Wholesale Electricity Market Concerning Emissions Trade Shijun Fu Department of Logistic Engineering, Chongqing University of Arts and Sciences, Chongqing, China Email address: To cite this article: Shijun Fu. An Optimal CO 2 Saving Dispatch Model for Wholesale Electricity Market Concerning Emissions Trade. American Journal of Energy Engineering . Vol. 7, No. 1, 2019, pp. 15-27. doi: 10.11648/j.ajee.20190701.13 Received : April 21, 2019; Accepted : May 29, 2019; Published : June 12, 2019 Abstract: Deep CO 2 mitigation provides a challenge to fossil fuel-fired power industry in liberalized electricity market process. To motivate generator to carry out mitigation action, this article proposed a novel dispatch model for wholesale electricity market under consideration of CO 2 emission trade. It couples carbon market with electricity market and utilizes a price-quantity uncorrelated auction way to operate both CO 2 allowances and power energy trade. Specifically, this CO 2 saving dispatch model works as a dynamic process of, (i) electricity and environment regulators coordinately issue regulatory information; (ii) initial CO 2 allowances allocation through carbon market auction; (iii) load demands allocation through wholesale market auction; and (iv) CO 2 allowances submarket transaction. This article builds two stochastic mathematical programmings to explore generator’s auction decision in both carbon market and wholesale market, which provides its optimal price-quantity bid curve for CO 2 allowances and power energy in each market. -
ABSTRACT ESSAYS on AUCTION DESIGN Haomin Yan Doctor of Philosophy, 2018 Dissertation Directed By: Professor Lawrence M. Ausubel
ABSTRACT Title of dissertation: ESSAYS ON AUCTION DESIGN Haomin Yan Doctor of Philosophy, 2018 Dissertation directed by: Professor Lawrence M. Ausubel Department of Economics This dissertation studies the design of auction markets where bidders are un- certain of their own values at the time of bidding. A bidder's value may depend on other bidders' private information, on total quantity of items allocated in the auction, or on the auctioneer's private information. Chapter 1 provides a brief introduction to auction theory and summarizes the main contribution of each following chapter. Chapter 2 of this dissertation ex- tends the theoretical study of position auctions to an interdependent values model in which each bidder's value depends on its opponents' information as well as its own information. I characterize the equilibria of three standard position auctions under this information structure, including the Generalized Second Price (GSP) auctions, Vickrey-Clarke-Groves (VCG) auctions, and the Generalized English Auc- tions (GEA). I first show that both GSP and VCG auctions are neither efficient nor optimal under interdependent values. Then I propose a modification of these two auctions by allowing bidders to condition their bids on positions to implement ef- ficiency. I show that the modified auctions proposed in this chapter are not only efficient, but also maximize the search engine's revenue. While the uncertainty of each bidder about its own value comes from the presence of common component in bidders ex-post values in an interdependent values model, bidders can be uncertain about their values when their values depend on the entire allocation of the auction and when their values depend on the auctioneer's private information. -
Spectrum Access and Auctions
Spectrum Access and Auctions Workshop on Spectrum Management: Economic Aspects 21 – 23 November 2016 Tehran, Iran ITU Regional Office for Asia and the Pacific Aamir Riaz International Telecommunication Union [email protected] Run-Down 1. Auction as a way of granting Access to Spectrum 2. The organisation and mechanisms of auctions 3. Different types of auction design 4. Additional considerations for designing an auction 5. Summary Aim Introduce the main economic principles and market-based mechanisms of SM especially with regards to where and how the advanced market-based tools fit into the overall context of modern SM. Traditional methods of granting access to Spectrum Apart from unlicensed (commons) spectrum bands , the spectrum regulator has traditionally assigned frequencies within geographical areas to users, often via granting them a licence, which has normally been for their exclusive use Historically (pre commercial mobile era) three general ways WERE predominant • FCFS: Giving licence to the first applicant for it, if that is the only one (First come, first served) • Beauty contests: Asking applicants to make written requests for the licence, and allocating the licences to those making the most convincing case • Reserving particular entity: Specially for which there was excess demand at a zero or negligible price (sometimes referred to as lotteries) In a beauty contest, typically a group of officials (not necessarily well acquainted with all aspects of the business) is determining the best proposal which may be optimistic or even misleading • Fees of spectrum recource more to cover administrative costs • Less transparency in decisions Why Auction? Introduction of commercial Mobile use • A new method has displaced earlier methods.