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24 - Coalition-based Pricing in Ascending Combinatorial Auctions

from Part III - Alternative Auction Designs

Published online by Cambridge University Press:  26 October 2017

By
Martin Bichler ,
Zhen Hao  and
Gediminas Adomavicius
Edited by
Martin Bichler  and
Jacob K. Goeree
Martin Bichler
Affiliation:
Department of Informatics, Technical University of Munich
Zhen Hao
Affiliation:
Department of Informatics, Technical University of Munich
Gediminas Adomavicius
Affiliation:
Carlson School of Management, University of Minnesota
Martin Bichler
Affiliation:
Technische Universität München
Jacob K. Goeree
Affiliation:
University of New South Wales, Sydney
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Summary

Introduction

Due to the advances in modern computing and communication capabilities which allow to adopt advanced auction mechanisms in increasingly broader and larger-scale online settings, the theory on how multiple indivisible objects should be allocated via an auction has enjoyed renewed interest in recent years (Krishna 2002, Cramton et al. 2006, Bichler et al. 2010). One of the key goals in this research literature is to develop mechanisms that achieve high (allocative) efficiency. Allocative efficiency measures whether auctioned objects end up with the bidders who have the highest valuations for them, representing a measure of social welfare.

In this paper we aim to design highly efficient ascending combinatorial auctions. Among the problems that make this goal hard to achieve, the coordination of bidders is a key problem that has been largely underexplored in prior work. Specifically, the currently losing bidders have a task of identifying individually profitable and collectively complementary item bundles to bid on from an exponentially-sized set of all possible bundles (and determining appropriate bid prices for them), which together stand a chance of becoming a winning bid set in the next round. Identifying such bundle bids is possible either via a large number of auction rounds or by means of a highly non-trivial coordination among coalitions of losing bidders, which is difficult without appropriate price feedback. We address this challenge by proposing a coalitional pricing rule, which is able to draw on the data that the auctioneer collects about bidders’ preferences throughout the auction and, as a result, helps currently losing bidders to coordinate. The proposed combinatorial auction mechanism exhibits substantially improved convergence and increased efficiency in lab experiments.

The Need for Ascending Combinatorial Auctions

Combinatorial auctions are among the most general types of multi-object market mechanisms, as they allow selling (or buying) a set of heterogeneous items to (or from) multiple bidders.

Type
Chapter
Information
Handbook of Spectrum Auction Design , pp. 493 - 528
Publisher: Cambridge University Press
Print publication year: 2017

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References

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