Abstract
Package bids, i.e., bids on sets of items, are an essential aspect of combinatorial auctions. They can allow bidders to accurately express their preferences. However, bidders on packages consisting of few items are often unable to outbid provisionally winning bids on large packages. To resolve this, both coordination as well as cooperation are needed. Coordination, since smaller bidders need to bid on packages that are disjoint; cooperation, since typically bid increases from more than one bidder are required to overcome the threshold to outbid a larger package bid. The authors design an information system that supports the implementation of an iterative combinatorial auction; this system is specifically aimed at helping bidders overcome coordination and threshold problems. They study the effect of information feedback on the behavior of bidders in different auction settings. The authors test this in an experimental setting using human bidders, varying feedback from very basic information about provisionally winning bids/prices, to providing more advanced concepts such as winning and deadness levels, and coalitional feedback. The experiment indicates that coalitional feedback has a positive impact on economic efficiency in cases where difficult threshold problems arise; however, it appears to have an adverse effect when threshold problems are easy.
Highlights
Combinatorial auctions (CAs) are allocation mechanisms that enable selling and buying multiple items simultaneously
The authors design an information system that supports the implementation of an iterative combinatorial auction; this system is aimed at helping bidders overcome coordination and threshold problems
The value of factual coalitional feedback (FCFB) lies in the information we provide to a bidder with a non-winning bid regarding the existence of other bids that potentially can help to jointly become winning
Summary
Combinatorial auctions (CAs) are allocation mechanisms that enable selling and buying multiple (indivisible) items simultaneously. CAs allow bidders to bid on sets of items (packages) and the auctioneer can allocate any package only in its entirety to the corresponding bidder. CAs have established themselves as a viable allocation mechanism in settings where market prices are not readily available, and bidders have sub- or super-additive valuations. CAs offer the possibility for a coalition of bids on small packages to jointly outbid a single bidder’s claim on the complete set of items. (1) The coordination problem Bidders need to coordinate their bids and bid on complementary (i.e., nonoverlapping) sets of items. The coordination challenge lies in bidders having to discover such a set of individually profitable and collectively complementary packages, given that the number of possible
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