ausubel-cramton-milgrom-the-clock-proxy-auction - In Peter...

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1 In Peter Cramton, Yoav Shoham, and Richard Steinberg (eds.), Combinatorial Auctions , MIT Press, Chapter 5, 115-138, 2006. The Clock-Proxy Auction: A Practical Combinatorial Auction Design Lawrence M. Ausubel, Peter Cramton, and Paul Milgrom Abstract We propose the clock-proxy auction as a practical means for auctioning many related items. A clock auction phase is followed by a last-and-final proxy round. The approach combines the simple and transparent price discovery of the clock auction with the efficiency of the proxy auction. Linear pricing is maintained as long as possible, but then is abandoned in the proxy round to improve efficiency and enhance seller revenues. The approach has many advantages over the simultaneous ascending auction. In particular, the clock-proxy auction has no exposure problem, eliminates incentives for demand reduction, and prevents most collusive bidding strategies. 1 Introduction In this chapter we propose a method for auctioning many related items. A typical application is a spectrum sale in which different bidders combine licenses in different ways. Some pairs of licenses may be substitutes and others may be complements. Indeed, a given pair of licenses may be substitutes for one bidder but complements for another, and may change between substitutes and complements for a single bidder as the prices of the other licenses vary. Our proposed method combines two auction formats—the clock auction and the proxy auction—to produce a hybrid with the benefits of both. The clock auction is an iterative auction procedure in which the auctioneer announces prices, one for each of the items being sold. The bidders then indicate the quantities of each item desired at the current prices. Prices for items with excess demand then increase, and the bidders again express quantities at the new prices. This process is repeated until there are no items with excess demand. The ascending proxy auction is a particular package bidding procedure with desirable properties (see Ausubel and Milgrom 2002, Chapter 3). The bidders report values to their respective proxy agents. The proxy agents iteratively submit package bids on behalf of the bidders, selecting the best profit opportunity for a bidder given the bidder’s inputted values. The auctioneer then selects the provisionally winning bids that maximize revenues. This process continues until the proxy agents have no new bids to submit. The clock-proxy auction is a hybrid auction format that begins with a clock phase and ends with a final proxy round. First, bidders directly submit bids in a clock auction, until there is no excess demand for any item. Then bidders have a single opportunity to input proxy values. The proxy round concludes the auction. All bids are kept live throughout the auction. There are no bid withdrawals. The bids of a particular bidder are mutually exclusive. There is an activity rule throughout the clock phase and between the clock phase and the proxy round.
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2 There are three principal motivations behind our clock-proxy auction proposal. First, Porter
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This note was uploaded on 10/21/2009 for the course ECON ECON703 taught by Professor Professorpetercramton during the Fall '09 term at Maryland.

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ausubel-cramton-milgrom-the-clock-proxy-auction - In Peter...

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