Lawrence M. AUSUBEL and Oleg BARANOV

Dynamic Vickrey Pricing in Spectrum Auctions

Auction literature provides us with two prescriptions for achieving efficient outcomes in practical auction settings. First, an auction design should use the opportunity cost pricing principle to the extent possible to promote truthful revelation of bidder preferences. Second, the pricing mechanism should be implemented via an iterative first-price process where all bidders are fully informed about their current price at each iteration. For the heterogeneous environment with substitutes, we develop an auction design that adheres to both principles. We also show that the same approach can be used to address major problems of SMRA and CCA designs two leading auction formats used for spectrum auctions.

Efficient Procurement Auctions with Increasing Returns

For procuring from sellers with decreasing returns, there are known efficient dynamic auction formats. In this paper, we design an efficient dynamic procurement auction for the case where goods are homogeneous and bidders have increasing returns. Our motivating example is the procurement of vaccines, which often exhibit large fixed costs and small constant marginal costs. The auctioneer names a price and bidders report the interval of quantities that they are willing to sell at that price. The process repeats with lower prices, until the efficient outcome is discovered. We demonstrate an equilibrium that is efficient and generates VCG prices.


Bidding Strategies in Combinational Procurement Auctions with Diseconomies of Scale
joint with Gian-Marco Kokett and Per Paulsen

Equilibrium bidding strategies in combinatorial auctions are not well understood. Ex-post split-award auctions are a wide-spread form of combinatorial procurement auctions, in which the demand  for some quantity to be procured is split into two or more shares. We focus on markets with n > 2 bidders and diseconomies of scale, which is practically relevant and strategically challenging, since bidders have to coordinate on the efficient outcome. We show that the first-price sealed-bid and the Dutch ex-post split-award auction are not strategically equivalent. The sealed-bid format exhibits a coordination problem for bidders, whereas the Dutch has a unique and efficient equilibrium. Hence, it is possible to characterize conditions, for which a buyer should strictly prefer the Dutch over the first-price sealed-bid auction. We also provide results from initial laboratory experiments.   


Equilibrium in a Uniform-Price Auction with Private Values

In a model incorporating bidders with private information bidding for multiple units of a homogeneous good, I show that the equilibrium bid functions can be completely characterized, sometimes in closed form. The equilibrium bid functions can be considered aggregated bid functions from rst-price single unit bidders. This property allows one to extend results from the single-unit auction literature to this multi-unit setting.


An Open Access Wireless Market
joint with Linda Doyle

We present a market design for an open access wireless market. Open access means that in real time, network capacity cannot be withheld—network throughput is priced dynamically by the marginal demand during congestion. In unconstrained times and locations, a nominal fee is paid for network throughput. As in electricity markets, the real-time market provides the foundation for forward markets. Monthly forwards are auctioned before the start of each month; yearly forwards are auctioned before the start of each year. Market participants, both operators and traders, take positions in forward auctions to manage risk and optimize portfolios. Deviations from forward positions are settled at real-time prices based on actual use. The independent system operator runs the network and conducts the real-time, monthly, and yearly auctions of network throughput. An independent market monitor observes the market, identifies problems, and suggests solutions. A board—including affiliated directors representing important stakeholders together with independent directors with subject matter expertise—governs the market. A goal of the market is to provide a secure, robust, wide-coverage platform for mobile communications supporting public safety and universal service. Public safety has pre-emptive rights during emergencies and otherwise has economic use like wholesale operators. A complementary goal is competition. The open access provision brings vibrant competition through low-cost, non-discriminatory entry into the wireless market. The market provides a natural remedy for mergers, allowing operational efficiency gains while increasing competition. Critical funding is provided through efficient congestion pricing that balances supply and demand at every time and location. The market, enabled by flexible handsets and the LTE technology, radically reforms current spectrum policy. The market coexists and complements the dedicated networks of incumbent carriers, promoting efficient spectrum use and essential innovation.


Position auctions with endogenous supply
joint with D. Khakimova and G. Romanyuk

We consider a multi-object private values setting with quantity externalities. In this setting, a value to a bidder from an object may depend on the total number of objects sold. For example, the likelihood a customer will respond to an advertisement is higher the fewer other advertisements are shown; a spectrum license is more valuable the fewer licenses are being allocated. We raise and solve the problem of finding revenue maximizing and efficiently allocating auctions in such a setting. We show that both optimal and efficient auctions have the property that the quantity of objects sold depends non-trivially on the whole profile of players' valuations. That is, the quantity to sell is determined endogenously, within the auction. We demonstrate that auctions currently used for allocating advertising positions are suboptimal and offer simple designs that can impliment (or approximate) optimal and efficient auctions under quantity externalities.

Maarten JANSSEN and Bernhard KASBERGER

On the Clock of the Combinatorial Clock Auction

The Combinatorial Clock Auction (CCA) has been frequently used in recent spectrum auctions. It combines a dynamic clock-phase with subsequent VCG pricing in order to maximize price discovery and efficiency. We inquire into the role of the clock when bidders have lexicographic preferences for raising rivals' costs. All equilibria of the CCA are inefficient if there is substantial room for price discovery, that is, if there is large uncertainty concerning the competitor's type. Conversely, in all efficient equilibria price discovery is limited. Qualitative features of our equilibria are in line with evidence concerning bidding behavior in some recent CCAs.


Dominant-Strategy Double-Clock Auctions with Estimation-Based Tatonnement
joint with Claudio Mezzetti

We introduce two versions of a double-clock auction mechanism for a homogenous good market with multidimensional private information and multi-unit traders that never runs a deficit, is ex-post individually rational and in which sincere bidding is a dominant strategy equilibrium. The first version targets efficiency, the second targets maximization of the market maker’s profit. In both versions, the market maker estimates demand and supply using information from the bids as traders drop out and follows an estimation-based tˆatonnement process to adjust the clock prices. Under mild regularity conditions convergence to efficiency in the first version and to the profit maximizing posted-price outcome in the second version obtains as the market size grows. The design may be modified to allow quantity constraints and to target an intermediate objective between efficiency and profit maximization.

Leslie M. MARX

Prior-Free Asymptotically Optimal Clock Auctions
joint with Simon Loertscher

Clock auctions endow agents with obviously dominant strategies, protect the privacy of trading agents and the designer from regret, and yield envy-free allocations. Not surprisingly, clock auctions have proved essential for practical implementation. Mechanisms with estimation allow prior-free mechanisms to be asymptotically Bayesian optimal but typically sacrifice the desirable properties of clock auctions. We develoß prior-free asymptotically optimal clock auctions, exploiting a realtionship between spacings between order statistics and virtual types and using a smooth estimator of virtual types based on this relationship. Our clock auctions satisfy additional desiderata like sequentially consistency and deficit-freeness.


Auctions for upstream inputs
joint with Patrick Rey


Constraints on Matching Markets Based on Moral Concerns
joint with Katharina Huesmann

Monetary transfers are banned or heavily restricted in many markets.

These restrictions are often motivated by moral concerns. However, it is not obvious whether the observed restrictions on monetary transfers are the appropriate market design answer to these concerns. Instead of exogenously restricting monetary transfers on a market for indivisible objects, we introduce a desider-atum based on egalitarian objectives and study its market design implications. The desideratum we consider is discrimination-freeness, which requires that an agent’s access to certain resources is independent of his wealth endowment. A key assumption in our model is that wealth impacts on the agents’

willingness to pay. We show that if discrimination-freeness is desired monetary transfers cannot be used to Pareto-improve ordinal assignment mechanisms that do not involve monetary transfers. Moreover, we find that implementable social choice functions are discrimination-free if and only if an agent’s object assignment is independent of his preference intensities and his money assignment is indepen-dent of his preferences.

In situations where money can be used outside a market designer’s control, we show that externality-freeness is needed: an agent’s ob-ject assignment has to be independent of other agents’ preferences. We discuss several real-world examples in the context of discrimination-freeness including compensation for kidney donors.