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6 - The Clock-Proxy Auction: A Practical Combinatorial Auction Design

from Part II - The Combinatorial Clock Auction Designs

Published online by Cambridge University Press:  26 October 2017

By
Lawrence M. Ausubel ,
Peter Cramton  and
Paul R. Milgrom
Edited by
Martin Bichler  and
Jacob K. Goeree
Lawrence M. Ausubel
Affiliation:
Department of Economics, University of Maryland
Peter Cramton
Affiliation:
Department of Economics, University of Maryland
Paul R. Milgrom
Affiliation:
Department of Economics, Stanford University
Martin Bichler
Affiliation:
Technische Universität München
Jacob K. Goeree
Affiliation:
University of New South Wales, Sydney
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Summary

Introduction

In this chapter we propose a method for auctioning many related items. A typical application is a spectrum sale in which different bidders combine licenses in different ways. Some pairs of licenses may be substitutes and others may be complements. Indeed, a given pair of licenses may be substitutes for one bidder but complements for another, and may change between substitutes and complements for a single bidder as the prices of the other licenses vary. Our proposed method combines two auction formats—the clock auction and the proxy auction—to produce a hybrid with the benefits of both.

The clock auction is an iterative auction procedure in which the auctioneer announces prices, one for each of the items being sold. The bidders then indicate the quantities of each item desired at the current prices. Prices for items with excess demand then increase, and the bidders again express quantities at the new prices. This process is repeated until there are no items with excess demand.

The ascending proxy auction is a particular package bidding procedure with desirable properties (see Ausubel and Milgrom 2002, 2006). The bidders report values to their respective proxy agents. The proxy agents iteratively submit package bids on behalf of the bidders, selecting the best profit opportunity for a bidder given the bidder's inputted values. The auctioneer then selects the provisionally winning bids that maximize revenues. This process continues until the proxy agents have no new bids to submit.

The clock-proxy auction is a hybrid auction format that begins with a clock phase and ends with a final proxy round. First, bidders directly submit bids in a clock auction, until there is no excess demand for any item. Then bidders have a single opportunity to input proxy values. The proxy round concludes the auction. All bids are kept live throughout the auction. There are no bid withdrawals. The bids of a particular bidder are mutually exclusive. There is an activity rule throughout the clock phase and between the clock phase and the proxy round.

Type
Chapter
Information
Handbook of Spectrum Auction Design , pp. 120 - 140
Publisher: Cambridge University Press
Print publication year: 2017

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References

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Ausubel, Lawrence M. and Peter, Cramton (2002) “Demand Reduction and Inefficiency inMulti-Unit Auctions,” University of Maryland Working Paper 9607, revised July 2002.
Ausubel, Lawrence M. and Peter, Cramton (2002) “Demand Reduction and Inefficiency inMulti-Unit Auctions,” University of Maryland Working Paper 9607, revised July 2002.
Ausubel, Lawrence M. and Peter, Cramton (2004) “Auctioning Many Divisible Goods,” Journal ofthe European Economic Association, 2, 480–493, April–May.Google Scholar
Ausubel, Lawrence M., Peter, Cramton, and Wynne P. Jones (2002) “System and Method for an Auction of Multiple Types of Items.” International Patent Application No. PCT/ US02/16937.
Ausubel, Lawrence M. and Paul, Milgrom (2001) “System and Method for a Dynamic Auction with Package Bidding,” International Patent Application No. PCT/US01/43838.
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