Innovations in the design of bundled-item auctions

Abstract

A uctions have captured the attention of economists for several reasons. One is the relevance for specific applications of research on auctions in light of their widespread and growing use in the field, particularly in online transactions. Auctions are also highly amenable to economic analysis, because the rules are generally precisely defined; modern game-theoretic techniques of economic analysis can be brought to bear with fewer simplifying assumptions than for many other areas of economics. Furthermore, the rich variety of possible auction rules and underlying environments in which auctions can be conducted provide a wealth of interesting economic issues to investigate. The study of auctions, which began with the seminal work of Vickrey (1), has yielded useful policy prescriptions with regard to the sale of goods. The work that Porter et al. (2) report and summarize in this issue of PNAS is representative of a particularly interesting and useful branch of this research, the development of combinatorial auctions.The Porter et al. (2) study employs the research methodology of experimental economics. Although introduced later than in the natural sciences and psychology, experimental methods in economics have gained broad acceptance in recent decades. As in the natural sciences, an experiment involves constructing a laboratory environment specifically for the purpose of addressing research questions. Human subjects are placed in a laboratory economy, and their decisions and the resulting outcomes are studied. The investigator is able to observe variables with values that are unknown in typical economic situations, to control parameters of interest, and to replicate the experiment repeatedly under identical conditions. One of the most innovative uses of the methodology has been to design and test new auction rules for use in specific applications.The performance of an auction system is typically evaluated on two criteria: efficiency and revenue.

Multiunit Auctions

“…As such, an attractive feature of the CC is that it might eliminate potential strategic complications associated with placing a specific bid on a package such as jump bidding (see Section ) since bidders are simply deciding what packages are profitable given current prices. Noussair () provides a description of how the CC may have more desirable strategic properties over other auctions such as AUSM. Porter et al .…”

An Efficient and Incentive Compatible Dynamic Auction for Multiple Complements

“…Then a fundamental and intriguing question arises: how to restore such bidders' incentives to bid sincerely as price takers. Third, a threshold problem also poses a hazard to efficient outcomes in a package auction ðsee, e.g., Noussair 2003;Porter et al 2003Þ. For illustration, assume that John and Peter want items A and B, respectively, but David wants A and B together.…”

Economic Experiments and Environmental Policy

“…SeeNoussair (2003) for a discussion of work on complex auctions for environments in which preferences have nonconvexities.…”