Auction Performance Research Articles

The Swiss Umts Spectrum Auction Flop: Bad Luck or Bad Design?

This paper gives an account of events, and explains some systematic reasons of the UMTS auction flop in Switzerland. Apart from general market developments, which could not have been anticipated, we argue that auction design which was introduced in England and adopted in Switzerland and elsewhere is a cause of the disappointing performance of many UMTS auctions in Europe, of which Switzerland is just one particularly pronounced example.The regulator would have been better advised to import some key ingredients of the auction design employed in Germany and Austria. This would have assured higher revenue or more competition. The paper closes with several proposals on how one should conduct future spectrum auctions.

Multi-Unit Auctions: A Comparison of Static and Dynamic Mechanisms

We compare, experimentally, the Vickrey auction and an ascending-price auction recently introduced by Ausubel (1997). We evaluate the relative performance of both auctions in terms of efficiency and revenue in multi-unit environments where valuations either have a common-value component or are private information. We find that the Ausubel auction is less prone to overbidding and may yield higher revenue than the Vickrey auction. The gain in revenue seems to be coupled with a loss of efficiency.

Assessing the Performance of Real Estate Auctions

This article investigates the performance of real estate auctions relative to negotiated sales. It uses a repeat‐sales methodology to control for unobserved differences in the quality of auction properties. Properties auctioned in Los Angeles during the 1980s boom sold at an estimated discount of 0%–9%, while sales in Dallas following the oil bust obtained discounts of 9%–21%. This evidence is consistent with the theoretical prediction that the auction discount increases in downturns when a seller trades‐off a longer expected selling time in a search market against an immediate auction sale. The study finds no evidence of the declining price anomaly.

Standard Auctions with Financially Constrained Bidders

We develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay. We then apply the framework to scenarios involving standard auction mechanisms. In the simplest case, where bidders face absolute spending limits, first-price auctions yield higher expected revenue and social surplus than second-price auctions. The revenue dominance of first-price auctions over second-price auctions carries over to the case where bidders have access to credit. These rankings are explained by differences in the extent to which financial constraints bind in different auction formats.

Laboratory Experimental Testbeds: Application to the PCS Auction

The paper reviews the uses of laboratory experimental economics methods in the background research and implementation of the Personal Communication Systems auctions held by the Federal Communications Commission. The applications began during the rule making process with the testing of broad rules that might be implemented. Data from experiments were systematically used. The methods were used again in the software development process where several important contributions were made. Finally, experiences gained from the study of experimental auction processes were used in the actual management of the first auctions and in interpreting auction performance.

Auctioning Conservation Contracts: A Theoretical Analysis and an Application

AbstractAuction theory is used to analyze the potential benefits of auctions in allocating contracts for the provision of nonmarket goods in the countryside. A model of optimal bidding for conservation contracts is developed and applied to a hypothetical conservation program. Competitive bidding, compared to fixed‐rate payments, can increase the cost effectiveness of conservation contracting significantly. The cost revelation mechanism inherent in the bidding process makes auctions a powerful means by which to reduce the problems of information asymmetry. Strategic bidding behavior, which may adversely affect the performance of sequential auctions, is difficult to address by means of auction design.

A Model of Negotiated Sales Applied to Real Estate Auctions

Recently, real estate auctions have grown substantially in depressed markets. This article develops a framework to compare the performance of auctions to that of negotiated sales. First, the article solves a search model that incorporates unforeseen shocks and compares how prices respond in the short-run and long-run. Next, auctions are considered. Auctions are shown to obtain discounts because a quick sale results in a poorer "match" between house and buyer, on average, than could be obtained by waiting longer for a buyer. The model predicts that auction discounts should be larger in down markets with high vacancies, and in less dense markets.

HOW TRADING INSTITUTIONS AFFECT FINANCIAL MARKET PERFORMANCE: SOME LABORATORY EVIDENCE

The effects of trading institutions on market efficiency and trading volume are examined. The trading institutions are computerized versions of continuous double auction and “clearinghouse” markets. Traders are experienced, profit‐motivated undergraduates. The traded good is a financial asset whose monetary value is state‐ and trader type‐contingent. Traders possess asymmetric private information on asset value. The results show that clearinghouse markets are as informationally efficient as double auction markets and almost as allocationally efficient; the double auction encourages greater trading volume but the clearinghouse provides greater depth; public orderflow information enhances double auction performance but impairs clearinghouse performance.