Putting Auction Theory to Work: Ascending Auctions with Package Bidding
Sunday, December 3, 2000 - 1:30pm - 2:30pm
Paul Milgrom (Stanford University)
After reviewing the factors contributing to the present interest in new package bidding designs, a benchmark ascending auction with package bidding is described. If bidders bid straightforwardly at each round for the potentially most profitable package, the allocation converges to an approximately efficient one. Straightforward bidding is consistent with equilibrium when there are only two bidders and it is a best reply to straightforward bidding by other bidders for a bidder that wants to acquire all the items for sale. More generally, if others bid straightforwardly, then non-monotonicity in the prices over time create an incentive for bidders to delay making serious bids, increasing the time requirements and degrading the performance of the auction.