Strategic Complexities in the Combinatorial Clock Auction

Abstract

In recent years, regulatory bodies in Europe and around the world implemented Combinatorial Clock Auctions (CCA) to allocate scarce and valuable spectrum frequencies usage rights. Although the auction design is complex, the promise is that bidding becomes simple. More precisely, bidders may bid on the profit-maximizing package (truthful bidding) during the clock phase and submit bids that are equal to their valuations on only a handful of relevant packages (truncated bidding) in the supplementary phase. While this might be correct with the ideal implementation of the CCA for perfectly rational, profit-maximizing bidders with private values, our experience with consulting bidders shows that practical implementations of the CCA and the concerns of the bidders lead to severe complexities in determining the right bidding behavior. We provide simple examples that illustrate how “truthful and truncated“ bidding may be harmful to bidders and thereby illustrate the complexities bidders face in preparing for a CCA.