The Role of Auctions in Allocating Public Resources

This paper provides an economic framework within which to consider the effectiveness and limitations of auction markets. The paper looks at the use of auctions as a policy instrument and the effects of auction design on consumer interests, the efficient allocation of resources, and industry competitiveness.Australia; Research; Ascending-bid auction; Auctions; Bidders; Conservation funds; Descending-bid auction; Dutch auction; English auction; Environmental Management; First-price sealed-bid auction; Infrastructure; Markets; Oral auction; Outcry auction; Pollutant emission permits; Power supply contracts; Public resources; Radio- spectrum; Second-price sealed-bid auction Spectrum licences; Vickrey auction; Water rights;

Spectrum Auctions

Auctions have emerged as the primary means of assigning spectrum licenses to companies wishing to provide wireless communication services. Since July 1994, the Federal Communications Commission (FCC) has conducted 33 spectrum auctions, assigning thousands of licenses to hundreds of firms. Countries throughout the world are conducting similar auctions. I review the current state of spectrum auctions. Both the design and performance of these auctions are addressed.Auctions, Spectrum Auctions, Multiple Item Auctions

Agri-environmental auctions with synergies

Auctions are increasingly used in agri-environmental contracting. However, the issue of synergy effect between agri-environmental measures has been consistently overlooked, both by decision-makers and by the theoretical literature on conservation auction. Based on laboratory experiments, the objective of this paper is to compare the performance of different procurement auction designs (simultaneous, sequential and combinatorial) in the case of multiple heterogeneous units where bidders may potentially want to sell more than one unit and where their supply cost structure displays positive synergies. The comparison is made by using two performance criteria: budget efficiency and allocative efficiency. We also test if performance results are affected by information feedback to bidders after each auction period. Finally we explain performance results by the analysis of bidding behaviour in the three mechanisms.

Collusive Bidding: Lessons from the FCC Spectrum Auctions

The Federal Communications Commission (FCC) spectrum auctions use a simultaneous ascending auction design. Bidders bid on numerous communication licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to bid higher on any license. With full revelation of bidding information, simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. These strategies can help bidders coordinate a division of the licenses, and enforce the proposed division by directed punishments. We examine solutions to mitigate collusive bidding in the spectrum auctions, and then apply these ideas to the design of daily electricity auctions.Auctions, Collusion; Multiple Object Auctions; Spectrum Auctions

Competition Between Auctions

Even though auctions are capturing an increasing share of commerce, they are typically treated in the theoretical economics literature as isolated. That is, an auction is typically treated as a single seller facing multiple buyers or as a single buyer facing multiple sellers. In this paper, we review the state of the art of competition between auctions. We consider three different types of competition: competition between auctions, competition between formats, and competition between auctioneers vying for auction traffic. We highlight the newest experimental, statistical and analytical methods in the analysis of competition between auctions.auctions, bidding, competition, auction formats, auction houses

Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction

We experimentally test alternative auction designs suitable for pricing and removing troubled assets from banks’ balance sheets as part of the financial rescue. Many individual securities or pools of securities are auctioned simultaneously. Securities that are widely held are purchased in auctions for individual securities. Securities with concentrated ownership are purchased as pools of related securities. Each bank has private information about its liquidity need and the true common value of each security. We study bidding behavior and performance of sealed-bid uniform-price auctions and dynamic clock auctions. The clock and sealed-bid auctions resulted in similar prices. However, the clock auctions resulted in substantially higher bank payoffs, since the dynamic auction enabled the banks to better manage their liquidity needs. The clock auctions also reduced bidder error. The experiments demonstrated the feasibility of quickly implementing simple and effective auction designs to help resolve the crisis.Auctions, financial auctions, financial crisis

A Theory of Jump Bidding in Ascending Auctions

Jump bidding is a commonly observed phenomenon that involves bidders in ascending auctions submitting bids higher than required by the auctioneer. Such behavior is typically explained as due to irrationality or to bidders signaling their value. We present field data that suggests such explanations are unsatisfactory and construct an alternative model in which jump bidding occurs due to strategic concerns and impatience. We go on to examine the impact of jump bidding on the outcome of ascending auctions in an attempt to resolve some policy disputes in the design of ascending auctions.auction theory, ascending auctions, jump bidding

The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the ‘chopstick auction’ in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction has an efficient equilibrium and is revenue equivalent with the second-price sealed-bid auction in which the exposure problem is not present. In the experiment, however, we find that the chopstick auction is less efficient than the second-price sealed-bid auction and that it yields more [the same] revenue if bidders are inexperienced [experienced].chopstick auction, exposure problem, laboratory experiment, second-price sealed-bid auction