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American Economic Journal: Microeconomics: Vol. 2 No. 3 (August 2010)

AEJ: Micro Volume. 2, Issue 3 | Previous ArticleNext Article

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Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis

Article Citation

Kagel, John H., Yuanchuan Lien, and Paul Milgrom. 2010. "Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis." American Economic Journal: Microeconomics, 2(3): 160-85.

DOI: 10.1257/mic.2.3.160

Abstract

We use theory and experiment to explore the performance of multi-round, price-guided, combinatorial auctions. We define efficiency-relevant and core-relevant packages and show that if bidders bid aggressively on these and losing bidders bid to their limits, then the auction leads to efficient or core allocations. We study the theoretically relevant behaviors and hypothesize that subjects will make only a few significant bids, and that certain simulations with auto-bidders will predict variations in performance across different environments. Testing the combinatorial clock auction (CCA) design, we find experimental support for these two hypotheses. We also compare the CCA to a simultaneous ascending auction. (JEL D44)

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Authors

Kagel, John H. (OH State U)
Lien, Yuanchuan (CA Institute of Technology)
Milgrom, Paul (Stanford U)

JEL Classifications

D44: Auctions

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