Ascending-bid Auction Research Articles

Explaining Early Bidding in Informationally-Restricted, Ascending-Bid Auctions

Explaining Early Bidding in Informationally-Restricted, Ascending-Bid Auctions

A model of collusion formation and measurement in the open ascending bid auctions in the agricultural markets

PurposeThis paper gives a model of collusion formation and a method of measuring the degree of it among the traders/bidders in the agricultural commodity markets in India. The important assumption is that the bidding is repetitive with a set of common bidders. The theory has been derived based on the behavior of the wholesale market of agricultural commodities in India. The paper is based on full information in the collusion formation. The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation with the help of real-life data.Design/methodology/approachThe paper used the standard theory of optimization and the theory of auction and probability statistics.FindingsThis is a complete information model of cartel formation. The bidding is repetitive and continues forever in discrete time. Hence bidders behavior is observable. Using the proposed method, if the APMC measures for each market and publishes on a periodic basis, say weekly basis, then it will be easier to break the collusion in the market where relative collision is present. For example, if a farmer has three options to sell in three different markets, then the published data would help them to select the market where the degree of collusion is relatively lower. Moreover, the undesirable loss can be avoided based on the right choice of market. As a result, transaction costs will be optima.Originality/valueThe paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation with the help of real-life data.

Comparison of Four Basic Types of Auctions

Auction is a good way for people to exchange their goods and services and is essential to our daily life. Auctions can be classified into various genres and kinds depending on their unique rules. In this essay, I focused mainly on the four basic kinds of auctions: First-Price sealed-bid auction, Second-Price sealed-bid auction, Ascending-bid auction and descending-bid auction. I also tried to use several simple models to find out the characteristics and optimal strategies for each of the auction. Having their own advantages and weakness, different auctions should be used depending on specific situations to further maximize the efficiency of the auctions.

Fairness and Efficiency in Online Advertising Mechanisms

Online advertising often involves targeting ads to certain types of consumers where ads are commonly sold by generalized second price auctions. However, such an auction or mechanism could be considered unfair if similar consumers are consistently shown different ads or consistently receive different payoffs. Results show that such ascending bid auctions may result in unfair treatment and additionally that uncertainty regarding an ad’s value can result in inefficiency. An alternative way to assign ads to consumers is presented called the random assignment mechanism. Results show that the random assignment can improve fairness while improving efficiency in some circumstances.

It ain’t over until it’s over: English auctions with subsequent negotiations

We consider a standard private value ascending-bid auction and show that subsequent negotiations make a seller worse off. The reason is that the seller’s optimal strategy does not change if she can make a take-it-or-leave-it offer to the highest bidder after the auction. Consequently, her expected revenues do not increase with subsequent negotiations, but decrease if the highest bidder has some bargaining power.

Polish experience from first-ever spectrum auction

The Polish 4G spectrum auction was a watershed event for the Polish telecommunications market. For the first time in history, the Office of Electronic Communications decided to award spectrum by using an auction process. Polish regulators implemented a simultaneous multiple-round ascending-bid auction, which was widely used worldwide for selling spectrum. The process leading to the auction and the auction itself was lengthy and eventful. Due to the wrong auction design, the auction dragged on indefinitely, causing a delay in spectrum distribution. The auction ended only as a result of the government's intervention, after 8 months (513 rounds) of bidding that raised revenue of over PLN 9 billion (over EUR 2 billion). This paper describes in detail the rules of the Polish 4G auction, analyses bidding behaviour and auction dynamics of the crucial phases of auctions, and presents the final outcomes. It also draws lessons that could help policy makers in Poland and other countries in auction design.

Simultaneous multiple round ascending bid auction as an effective method of spectrum allocation

Simultaneous multiple round ascending bid auction as an effective method of spectrum allocation

A Model of Collusion Formation and Measurement in the Open Ascending Bid Auctions in Agricultural Commodity Markets

This paper derives a method of measuring the degree of collusion among the bidders in agricultural commodity markets in India and derives the distribution of the change in equilibrium bid prices with respect to time in open ascending price auction when the cartel is there. The important assumption is the bidding is repetitive with a set of common bidders. The theory has been derived based on the behavior of the wholesale market of agricultural commodities in India. This means the paper is based on full information model in the collusion formation. The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation.

Modelling and computational simulation of optimal auction design and bidding strategies

Orientation: This article is related to Finances and Optimisation. The auctioneer designs every auction mechanism such that utility is maximised and cost is minimised. Research purpose: This article proposes an optimal auction mechanism through which auctioneers can assign fairly and efficiently assets to the highest bidders and maximise utility and/or minimise cost. Motivation for the study: One of the tasks of my PhD was about spectrum auction from which I got a vision to design mathematical models and related computational simulations for any asset underlying an auction. Research approach/design and method: Firstly, a study was conducted to model the way auctioneers could analyse and estimate bidders’ (buyers’) valuations, and then, accordingly, set the prices of the underlying assets or services. An open ascending-bid auction mechanism was also considered. Finally, a first-price sealed-bid auction mechanism for utility maximisation and cost minimisation is investigated. Main findings: The substantive contribution of this article is in the set of mathematical models and computational simulations designed and proposed for the bidders’ valuations and the considered open ascending-bid auction. For the investigated first-price sealed-bid auction mathematical models are developed in terms of a combinatorial optimisation problem. The formula computing the expected utility for the auctioneer was designed. Practical/managerial implications: The research provides rigorous ways for optimal auction design to auctioneers and any financial operators or managers. Contribution/value-add: The contributions are in the set of mathematical models and computational simulations. This article models the optimal auction design strategy mechanism as a combinatorial optimisation problem.

An Efficient Ascending-Bid Auction for Multiple Objects: Comment

Ausubel (2004) introduces a new ascending-bid auction rule for multiple homogeneous objects, called the Ausubel auction, which is a dynamic counterpart of the Vickrey auction. He claims that in the Ausubel auction with private values, sincere bidding by all bidders is an ex post perfect equilibrium. However, we show that this claim does not hold in general by providing a counterexample. We then modify the Ausubel auction so that sincere bidding by all bidders is an ex post perfect equilibrium. (JEL D44)

A preference-based, multi-unit auction for pricing and capacity allocation

We study a pricing and allocation problem of a seller of multiple units of a homogeneous item, and present a semi-market mechanism in the form of an iterative ascending-bid auction. The auction elicits buyers’ preferences over a set of options offered by the seller, and processes them with a random-priority assignment scheme to address buyers’ “fairness” expectations. The auction’s termination criterion is derived from a mixed-integer programming formulation of the preference-based capacity allocation problem. We show that the random priority- and preference-based assignment policy is a universally truthful mechanism which can also achieve a Pareto-efficient Nash equilibrium. Computational results demonstrate that the auction mechanism can extract a substantial portion of the centralized system’s profit, indicating its effectiveness for a seller who needs to operate under the “fairness” constraint.

On the Auction-Based Resource Trading for a Small-Cell Caching System

In this letter, we propose an auction-based resource trading scheme between a network service provider (NSP) and multiple content providers (CPs). The NSP is in charge of a number of small-cell base stations (SBSs), while each CP provides content downloading services to its affiliated mobile users (MUs). By treating the SBSs as a kind of resources, the NSP leases SBSs to the CPs for caching their popular contents, thereby reducing the downloading latency of the MUs. We first establish the utility functions of the NSP and CPs. Then, we maximize the utilities of both sides by formulating an iterative auction problem, in which the NSP (auctioneer) communicates with the CPs (bidders) in an iterative manner for achieving optimal price and resource allocations. Furthermore, to avoid being cheated from the CPs, we adopt an ascending-bid auction mechanism such that the CPs do not have motivations to cheat the NSP for a lower price. Numerical results show that our proposed scheme can effectively allocate SBSs to the CPs and prevent each CP from cheating the NSP for gaining a higher profit.

Auctions Versus Private Negotiations in Buyer-Seller Networks

Buyer-seller networks where price is determined by an ascending-bid auction are important in many economic examples such as certain real estate markets, radio spectrum sharing, and buyer-supplier networks. However, it may be that some sellers are better off not participating in the auction. We consider what happens if sellers can make a take it or leave it offer to one of their linked buyers before the auction takes place and thus such a seller can choose not to participate in the auction. We give conditions on the graph and buyers valuations under which the buyer and seller will both agree to such a take it or leave it offer. Specifically, the buyer-seller pair will choose private negotiation over the auction if the seller acts as a network bridge with power over the buyer and if there are enough buyers with low valuations so that the seller does not expect to receive a high price in the auction.

Auctions versus Private Negotiations in Buyer-Seller Networks

Buyer-seller networks where price is determined by an ascending-bid auction are important in many economic examples such as certain real estate markets, radio spectrum sharing, and buyer-supplier networks. However, it may be that some sellers are better off not participating in the auction. We consider what happens if sellers can make a take it or leave it offer to one of their linked buyers before the auction takes place and thus such a seller can choose not to participate in the auction. We give conditions on the graph and buyers valuations under which the buyer and seller will both agree to such a take it or leave it offer. Specifically, the buyer-seller pair will choose private negotiation over the auction if the seller acts as a network bridge with power over the buyer and if there are enough buyers with low valuations so that the seller does not expect to receive a high price in the auction.

Identifying Collusion in English Auctions

We develop a fully nonparametric identification framework and a test of collusion in ascending bid auctions. Assuming efficient collusion, we show that the underlying distributions of values can be identified despite collusive behaviour when there is at least one bidder outside the cartel. We propose a nonparametric estimation procedure for the distributions of values and a bootstrap test of the null hypothesis of competitive behaviour against the alternative of collusion. Our framework allows for asymmetric bidders, and the test can be performed on individual bidders. The test is applied to the Guaranteed Investment Certificate auctions conducted by US municipalities over the Internet. Despite the fact that there have been allegations of collusion in this market, our test does not detect deviations from competition. A plausible explanation of this finding is that the Internet auction design involves very limited information disclosure.

Arriving in Time: Estimation of English Auctions With a Stochastic Number of Bidders

We develop a new econometric approach for the estimation of second-price ascending-bid auctions with a stochastic number of bidders. Our empirical framework considers the arrival process of new bidders as well as the distribution of bidders’ valuations of objects being auctioned. By observing the timing of bidder arrival, the model is identified even when the number of potential bidders is stochastic and unknown. The relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on eBay. Our results suggest a higher impact of sellers’ reputation on bidders’ valuations than previously reported in cross-sectional studies but the impact of reputation on bidder arrival is largely insignificant. Interestingly, a seller’s reputation impacts not only the actions of the bidders but the actions of the seller as well. In particular, experience and a good reputation increase the probability of a seller posting items for sale on longer-lasting auctions, which we find increases the expected revenue for the seller. Supplementary materials for this article are available online.

Arriving in Time: Estimation of English Auctions with a Stochastic Number of Bidders

We develop a new econometric approach for estimation of second-price ascending-bid auctions with a stochastic number of bidders. Our empirical framework considers the arrival process of new bidders as well as the distribution of bidders’ valuations of objects being auctioned. By observing the timing of bidder arrival the model is identified even when the number of potential bidders is stochastic and unknown. The relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on eBay. Our results suggest a higher impact of sellers’ reputation on bidders’ valuations than previously reported in cross-sectional studies but the impact of reputation on bidder arrival is largely insignificant. Interestingly, a seller’s reputation impacts not only the actions of the bidders but the actions of the seller as well. In particular, experience and a good reputation increase the probability of a seller posting items for sale on longer-lasting auctions which we find increases the expected revenue for the seller.

Sealed bid auctions versus ascending bid auctions: an experimental study

This paper considers two multi-item auction formats (ascending and sealed bid) which both identify the minimum Walrasian equilibrium prices and where truthful preference revelation constitutes an equilibrium. Even though these auction formats share many theoretical properties, there are behavioral aspects that are not easily captured. To explore this issue in more detail, this paper experimentally investigates what role the design of the auction format has for its outcome. The results suggest that the sealed bid mechanism performs weakly better in all of the investigated measures (consistent reporting, efficiency etc.). In addition, we find that the performance of the ascending auction is increasing over time, whereas the sealed bid auction shows no such tendency.

Spite and Reciprocity in Auctions

The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model.

Sealed Bid Auctions vs. Ascending Bid Auctions: An Experimental Study

This paper considers the sealed bid and ascending auction, which both identifies the minimum Walrasian equilibrium prices and where truthful preference revelation constitutes an equilibrium. Even though these auction formats share many theortical properties, there are behavioral aspects that are not easily captured. To explore this issue in more detail, this paper experimentally investigates what role the design of the auction format has for its outcome. The results suggest that the sealed bid mechanism performs weakly better in all of investigated measures (consistent reporting, efficiency etc.). In addition, we find that the performance of the ascending auction is increasing over time, whereas the sealed bid auction shows no such tendency.