Optimality and Efficiency in Auctions Design: A Survey

Zhan, Roger L.

doi:10.1007/978-0-387-77247-9_16

Cited by 13 publications

(11 citation statements)

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“…Efficiency and revenue are two performance metrics that auction mechanisms for DSA aim to optimize [14], [15]. On one hand, the auction intends to maximize the social welfare to be derived from the allocation of this public spectrum resource.…”

Section: Efficiency and Revenuementioning

confidence: 99%

Efficiency-Revenue Optimality Tradeoffs in Dynamic Spectrum Allocation

Taleghan

Hamdaoui

2010

2010 IEEE Global Telecommunications Conference GLOBECOM 2010

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This paper proposes an auction mechanism for dynamic spectrum allocation that balances between two conflicting objectives: revenue and efficiency. The spectrum resources are allocated by FCC (i.e., the auctioneer) with the objective of maximizing revenue while also increasing efficiency or social welfare. Unfortunately, revenue and efficiency are often not aligned with one another. Truthful mechanisms, such as Vickrey-Clarke-Groves (VCG), are shown to be efficient in terms of social welfare, but poor in terms of revenue generation. On the other hand, mechanisms, such as uniform-price, can generate higher revenues than VCG, but less efficient. We show that the incorporation of adequate reservation price to the uniform-price auction mechanism gives enough incentives to spectrum buyers to be truthful, thus providing a good balance between efficiency and revenue. We investigate the impact of reservation price not only on the revenue and efficiency, but also on the spectrum utilization. Simulation results show that the proposed auction mechanism maximizes revenue while also increasing efficiency and spectrum utilization.

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Section: Efficiency and Revenuementioning

confidence: 99%

Efficiency-Revenue Optimality Tradeoffs in Dynamic Spectrum Allocation

Taleghan

Hamdaoui

2010

2010 IEEE Global Telecommunications Conference GLOBECOM 2010

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“…By contrast, in private value auctions, the value of the good depends only on the bidder's own preferences. In auction design, efficiency and optimality are the two primary goals: the former focuses on the social welfare of the whole seller-bidder system, whereas the latter emphasizes the revenue-maximizing from the seller's perspective [9].…”

Section: Introductionmentioning

confidence: 99%

Revenue and Duration of Oral Auction

Shi¹,

Chang²

2009

JSSM

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“…78 In auctions theory, this concept is well demonstrated by the Vickrey-Clark-Groves mechanism (Zhan, 2008). 79 The cost of a single deep-water well can be as high as US$150m, whereas the penalty for failing to drill a well under the NELP can be as low as US$3m.…”

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confidence: 99%

“…A second price sealed bid auction implies that the winner, by paying the second highest bid, gains the opportunity cost for the lease -that is, the difference between the maximum total social welfare with and without the winning bidder (Zhan, 2008). 78 Additionally, market design measures could include the reservation of a certain amount of acreage for new entrants.…”

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confidence: 99%

“…Under third degree price discrimination, there are two instances when both optimality and efficiency can be achieved without losing consumer surplus (social welfare). First, the literature on asymptotic properties of auctions shows that when the number of bidders becomes very large, most standard auctions approach a position of optimality and efficiency simultaneously (Zhan, 2008;Fibich et al, 2004). Second, Aguirre (2011) shows that third degree price discrimination between two markets, one with inelastic demand (and a concave demand curve) and the other with elastic demand (and a convex demand curve) leads to a change in welfare which can be analysed in terms of two effects:…”

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Auctions for Oil and Gas Exploration Leases in India

Sen¹

2013

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This paper addresses the following policy question: why, despite nearly 15 years of operation of India's New Exploration Licensing Policy (NELP), representing two full exploration cycles has this regime yielded inconclusive results, both in terms of a firm indication of India's resource potential, and increased domestic production? This paper argues that a substantial part of the reason for this lack of performance may lie in auctions and market design, and uses data for the period 1999-2010, covering nine rounds of auctions, to explore three lines of argument relating to some unintended consequences of the NELP. First, the regime has led to a highly concentrated market in upstream acreages where a small number of firms hold the largest amounts of acreage. Second, the regime has led to a 'holdup' problem that can be attributed to information asymmetries between the government and bidders, where winning bidders may later not fulfil their work programme commitments within the stipulated timeframe. Third, the lack of a clearer definition of the objectives of the auction and their relative importance, specifically, optimality versus efficiency, may have acted as a constraint on the effectiveness of the regime. We use a combination of theory and empirics to explore these three hypotheses. At the end of the paper we draw the results together, showing that problems relating to auctions and market design may have led to a cycle of information asymmetry and inefficiency, the net effect of which has been a slowdown in India's domestic production, shortages in meeting supply targets, and the need for expensive imports. We suggest some policy options and areas for further research.iii Acknowledgments We are extremely grateful to Christopher Allsopp for his support, from providing advice in the early stages of research right through to reading numerous drafts. We would also like to thank Anil K. Jain for sharing with us his knowledge on Indian energy, and without whom it would have been very difficult to meet with key decision-makers in Indian government and industry. Colleagues at the OIES,

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Optimality and Efficiency in Auctions Design: A Survey

Cited by 13 publications

References 77 publications

Efficiency-Revenue Optimality Tradeoffs in Dynamic Spectrum Allocation

Efficiency-Revenue Optimality Tradeoffs in Dynamic Spectrum Allocation

Revenue and Duration of Oral Auction

Auctions for Oil and Gas Exploration Leases in India

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