Separate Auctions Research Articles

On the Role of Ad Networks: To Endogenize or Not to Endogenize the Number of Bidders in Auctions?

Abstract In the world of online advertising, demand for banner slots by advertisers is matched with the inventory available at different publishers by an intermediary (Ad Network or an Exchange). One important feature of auctions in the online advertising space is that publishers typically have multiple slots and advertisers are not necessarily interested in purchasing one unit but are rather interested in purchasing thousands of impressions. Furthermore, an ad network may have different types of publishers with varying quality of advertising space available. Consequently, bidders may value slots in one set of publishers very differently from slots in a different set. For instance, firms selling financial products and services may value slots at CNN.com’s financial section or WSJ.com very differently from slots available at people.com or even the weather section in CNN.com. So, the dilemma confronting an ad network that has inventory from different publishers, facing demand from say, advertisers selling financial products is whether to pool the inventory and conduct a single auction or conduct separate auctions so that the advertisers know that they are bidding for slots on CNN.com’s financial section or on WSJ.com and not for slots on the weather section on CNN.com or some other less preferred slots. Given the critical role that ad networks play, in serving the request of advertisers to get their advertising banners displayed in online media we examine the economic incentives of these intermediaries to derive implications for the optimal market design. More specifically, we seek answers to the following questions. Given the variation in the quality of inventory available from different publishers under what market conditions should the intermediary pool the inventory across the different publishers and conduct a single (undisclosed) auction and when would it be more profitable to conduct different (disclosed) auctions? Given a fixed number of bidders, if the intermediary chooses to conduct two auctions how many bidders should be allocated to each auction and how do market parameters such as the number of bidders or the inventory available of each type affect the allocation rule. Finally, if the intermediary chooses to conduct two auctions should they charge the same commission or different commissions in each auction? We find that when the number of advertisers is small then pooling inventory and conducting a single auction is the optimal strategy. Under these conditions when the inventory of the publishers is sufficiently differentiated it may even be optimal for the intermediary to conduct a single auction but ignore the inventory of the publisher that is valued lower. When the number of advertisers is large, we find very interestingly that conducting multiple auctions is not always optimal. Indeed, when the inventory of publishers is sufficiently differentiated conducting a single auction and ignoring the inventory of the publisher that is valued lower can still be optimal. We also identify market conditions when conducting two auctions and charging a single commission in both markets is more profitable than conducting two auctions and charging separate commissions (and vice versa).

Rodzaje aukcji na wytwarzanie energii elektrycznej z odnawialnych źródeł energii w świetle przepisów ustawy o odnawialnych źródłach energii

After an analysis of certain legal texts, the authors have established that under Polish law the President of the Energy Regulatory Offi ce may conduct 56 diff erent types of auctions for generators of the electric energy from renewable sources (RSE). For each individual RSE installation complying with the RES parameters a separate auction may be carried. One RSE installation may take part in several RSE auctions provided it satisfi es the parameters of each individual installation. These parameters concern both the premises connected with the start-up process (the commencement of the production of electric energy) of a given installation and the premises of technical nature such as carbon dioxide emission or the level of the installation capacity used, as well as premises of a subjective character regarding individual producers participating in the auction. A detailed analysis of all types of RSE auctions described in the Act of 20 February 2015 on renewable sources of energy allows to determine which types of installation may take part in individual actions. However, of key importance from the point of view of the possibility of a RSE auction to be carried are secondary regulations which allow the Council of Ministers to determine individual types of RSE auctions in which the volume of energy, subject of the auction, will be made available. Consequently the Council of Ministers which runs the State policy within the area of RSE has become essentially responsible not only for the possibility of conducting an RSE auction, but also for the implementation of the EU climate and energy policy which is also binding upon Poland.

Uncovering Bidder Behaviour in the German PV Auction Pilot: Insights from Agent-based Modeling

This paper analyses bidder behaviour in the German photovoltaic (PV) auction pilot. It uses a novel approach combining insights from data analysis and decision theory to optimise an agent-based simulation model. We model both a uniform pricing (UP) scheme, a pay-as-bid (PAB) scheme, and a benchmark case, where agents adapt their bidding strategy. The findings are contrasted with empirical auction outcomes. The comparison shows that, especially in the early rounds, bid prices were above the costs—possibly due to uncertainties and false expectations concerning competition. This is particularly visible in the first round. Adapting their expectations to a higher competition level, bidders in the pay-as-bid simulation subsequently decrease their bids. From simulating a separate auction for arable land bidders, we see that this bidder type reduces support costs substantially and that an implicitly discriminatory auction yields more aggressive bids and can induce further cost reductions.

On monotone strategy equilibria in simultaneous auctions for complementary goods

We explore existence and properties of equilibrium when N≥2 bidders compete for L≥2 objects via simultaneous but separate auctions. Bidders have private combinatorial valuations over all sets of objects they could win, and objects are complements in the sense that these valuations are supermodular in the set of objects won. We provide a novel partial order on types under which best replies are monotone, and demonstrate that Bayesian Nash equilibria which are monotone with respect to this partial order exist on any finite bid lattice. We apply this result to show existence of monotone Bayesian Nash equilibria in continuous bid spaces when a single global bidder competes for L objects against many local bidders who bid for single objects only. We then consider monotone equilibrium with endogenous tiebreaking building on Jackson, Simon, Swinkels and Zame (2002), and demonstrate that these exist in general. These existence results apply to many auction formats, including first-price, second-price, and all-pay.

Relation of economic and environmental indicators to the European Union Emission Trading System: a spatial analysis

Abstract The main goal of this contribution is to evaluate the development of CO2 emissions and selected economic indicators of EU28 countries in the period from 2005 to 2015, and to capture geographical pattern and spatial distribution of countries emitting pollution. This will be performed within the context of the EU Emissions Trading System (ETS), which has represented a major scheme in Europe to cope with CO2 emissions since 2005. The actual situation in the field of the EU ETS is described and key scientific studies focusing on the EU ETS are presented. Based on a broad set of indicators we examine and evaluate possible geographical pattern in the development of selected indicators within the EU and provide detailed spatial analysis of economic and environmental data of EU28 countries, with the use of (geo)visual analysis of spatial data and spatial statistics (grouping analysis). The preliminary results of the (geo)visual analysis show that CO2 emissions within EU countries were decreasing in the selected period 2005–2015, with some exceptions (e.g. Iceland and Latvia). As the development of CO2 emissions in all EU countries is not similar, the other economic and environmental indicators were included (e.g. GDP, Investments) into the analysis in order to reveal a common (geographical) pattern and explain the current situation. Based on grouping/cluster analysis, it is possible to form territorial groups of EU states with similar development, which are almost perfectly in the line with current EU member states strategies of CO2 emissions trade. The current auction markets are well in tune with geographical and economic characteristics of particular EU countries. Results of grouping analysis of all indicators in 2015 using six K-nearest neighbours underline current separate auction markets for Germany, the United Kingdom and Poland.It indicates that the system of emission auctions has logical background and the markets represent natural platforms for emission trading, corresponding to both economic and spatial characteristics of particular countries/polluters. Presented approach thus brings valuable information for policymakers both on the national and international level for the next phases of EU ETS scheme planning.

Generalized Second Price Auctions over a Network

We consider the problem of how to apply a generalized second price (GSP) auction to a buyer–seller network. GSP auctions are often used to sell online ads where buyers care about the position or placement of the ad. GSP auctions can also be applied to wireless data transmissions with congestion where buyers care about the speed of data transmission; however, such an auction would take place over a network as a buyer could only purchase from a seller (or cell tower) that he was linked to (or was close to). Two GSP auctions over a network are considered: separate GSP auctions, and integrated GSP auctions with pauses. The efficiency of these auctions is examined with efficiency favoring the integrated auction with pauses.

Impact analysis of different operation strategies for battery energy storage systems providing primary control reserve

Regarding the supply of primary control reserve (PCR), stationary battery energy storage systems (BESS) are a promising alternative to fossil fuel power plants. They offer the ability to respond fast and precisely to grid frequency deviations and may contribute to reducing the must-run capacity of fossil fueled power plants.In Germany, primary control reserve is traded on a separate auction market with specific regulations, which enable the BESS to use a number of measures to balance its charge level and preserve operability. However, little is known about how the requirements from primary control deployment and the measures to keep the BESS operational during PCR contract periods affect operational parameters of the system. This study investigates the impact of operation strategies on different parameters including energy exchange through schedule transactions, total energy turnover, full cycle equivalents (FCE), and state-of-charge (SOC) distributions in a case study for a 2MWh BESS under the German regulatory framework.The results of this study are key to the economic assessment of BESS providing PCR, to an optimization of BESS operation, and to an estimate of battery aging in this specific application field.Based on battery operation simulations, individual elements of operation strategies are identified and their influence on BESS operational parameters is analyzed in a parameter variation. These elements include the chosen measures for charge level management, the SOC ranges, within which these measures are used, parameters defining the schedule transactions, and the prequalified power rating of the BESS.The results show that the choice of the measures for charge level management, the choice of schedule transaction parameters and the prequalified power rating of the BESS have a major impact on energy exchange through schedule transactions. The choice of the measures for charge level management and the choice of schedule transaction parameters have limited influence on the total energy turnover and the resulting number of FCE. These values are mainly influenced by the system design.

On Monotone Strategy Equilibria in Simultaneous Auctions for Complementary Goods

We explore existence and properties of equilibrium when N>1 bidders compete for L>1 objects via simultaneous but separate auctions. Bidders have private combinatorial valuations over all sets of objects they could win, and objects are complements in the sense that these valuations are supermodular in the set of objects won. We provide a novel partial order on types under which best replies are monotone, and demonstrate that Bayesian Nash equilibria which are monotone with respect to this partial order exist on any finite bid lattice. We apply this result to show existence of monotone Bayesian Nash equilibria in continuous bid spaces when a single global bidder competes for L objects against many local bidders who bid for single objects only, highlighting the step in this extension which fails with multiple global bidders. We therefore instead consider an alternative equilibrium with endogenous tie-breaking building on Jackson, Simon, Swinkels and Zame (2002), and demonstrate that this exists in general. Finally, we explore efficiency in simultaneous auctions with symmetric bidders, establishing novel sufficient conditions under which inefficiency in expectation approaches zero as the number of bidders increases.

Sequential auctions and price anomalies

In sequential auctions objects are sold one by one in separate auctions. These sequential auctions might be organized as sequential first-price, second-price, or English auctions. We will derive equilibrium bidding strategies for these auctions. Theoretical models suggest that prices in sequential auctions with private values or with randomly assigned heterogeneous objects should have no trend. However, empirical research contradicts this result and prices exhibit a declining or increasing trend, which is called declining and increasing price anomaly. We will present a review of these empirical results, as well as different theoretical explanations for these anomalies.

Comparison of simultaneous and combinatorial auction designs in fisheries quota market

Individual transferable quota (ITQ) markets are being used successfully to distribute quotas in single region and single species fisheries. In many parts of the world, the development of well crafted markets for multispecies or multiregional fisheries is still evolving. As a result, there exists an opportunity to inform policy by providing research insights into the relative merits of alternative market designs for such fisheries. This study explored the relative merits of a simultaneous ascending auction design and an iterative combinatorial auction design for a hypothetical multiple region quota market. In a simultaneous auction, separate auctions are run in parallel for individual species or regions. During intermediate rounds, fishers can adjust their bids in auction depending on their position in the other auction. In a combinatorial auction, a fisher can purchase a combination of quotas (or a package quota) for different fish species or regions in the same auction. Being able to acquire bundles of species or regions allows fishers to take advantage of complementarities. To date, the potentials of such auctions have not been thoroughly tested in fisheries quota markets. This study found that while a simultaneous auction design was more efficient than combinatorial auction design overall, combinatorial market design took fewer rounds to make final allocations and performed better in high synergy environments. ► Fishers often have synergies in their valuations for ITQs for multiple regions. ► An ABM used to test market designs for quota allocation among fishers with value synergies. ► For the first time, a simultaneous (SA) and a combinatorial (CA) auction designs compared for ITQ market. ► Simulation results showed that SA design was more efficient than CA design overall. ► However, CA design performed better in high synergy environments.

The Option of Posted Price Selling for a Seller with Multiple Units

If a seller with many units sells all units using separate auctions at the same time, the random match among buyers and units will create allocation inefficiency. We show that with an option of posted price selling before the start of auctions, it is possible that in the equilibrium only some high valuation buyers want to buy through posted price selling. Thus, some high valuation buyers are screened out before the random match in auctions. The seller gets higher expected revenue and more units are allocated to high valuation buyers. The model may shed some light on the option of posted price selling for online auction markets.

To Bundle or Not to Bundle: Determinants of the Profitability of Multi-Item Auctions

This article introduces and empirically tests a conceptual model of the key determinants of the profitability of bundling in auction markets. The model encapsulates hypotheses about how seller revenue from the combined (i.e., bundle) auction of component products relative to that from separate auctions of the components is influenced by the heterogeneity in bidders’ product valuations, the degree of complementarity between component products, the particular multi-item selling strategy, and the outside availability of the products. The results of three field experiments show that though bundle auctions tend to be less profitable for noncomplementary and substitute products, they are on average 50% more profitable than separate auctions when there is (even only moderate) complementarity between the component products. The latter effect is greater when the bundle and the separate components are offered at different times, and it is more pronounced for services than for tangible goods. The findings also identify conditions under which each of the essential multi-item selling strategies for fixed-price settings (pure components, pure bundling, and mixed bundling) tends to maximize seller revenue in auctions.

The Product-Mix Auction: A New Auction Design for Differentiated Goods

The “Product-Mix Auction” is a single-round auction that can be used whenever an auctioneer wants to sell (or buy) multiple differentiated goods. It allows all participants to express their preferences between varieties, as well as for alternative quantities of specific varieties. Bidders simultaneously make sets of bids. Each of a bidder’s bids can be an OR” bid that offers a different price for each different variety, and the auction then accepts at most one of the offers from each bid (whichever is best for the bidder given the prices that the auction sets). The graphical solution method makes the operation and merits of the auction easy to explain. The auction is more efficient, and less sensitive to market power, than either running a separate auction for each different variety or running a combined auction with predetermined price differences between varieties. It is also faster, less vulnerable to collusion, and can be easier to use and understand than a simultaneous multiple round auction (SMRA). Moreover, unlike in an SMRA, the auctioneer can specify how the quantities to be sold will depend on the auction prices, by choosing supply functions across varieties. Related material is at www.paulklemperer.org.I invented the auction for the Bank of England when it consulted me at the beginning of the financial crisis in 2007. It now uses it regularly to auction loans of funds secured against different varieties of collateral. The Bank’s first implementation corresponds closely to the description in section 2; the then-Governor, Mervyn King, told the Economist that “[the Product-Mix Auction] is a marvellous application of theoretical economics to a practical problem of vital importance to financial markets” I also advised the Bank on the updated version it introduced in 2014. This permits more dimensions (i.e., more “varieties” of goods), and also allocates an endogenous total quantity. Simple linear-programming methods are now used to solve the auction.The current Governor, Mark Carney, announced plans for greater use of the auction.Future auctions may use others of the enhancements described in section 3.The Guardian newspaper published a 5 minute video including an interview with then-Deputy Governor, Paul Tucker.

A New Auction for Substitutes: Central-Bank Liquidity Auctions, 'Toxic Asset' Auctions, and Variable Product-Mix Auctions

This paper was revised as: The Product-Mix Auction: a New Auction Design for Differentiated Goods The “Product-Mix Auction” is a single-round auction that can be used whenever an auctioneer wants to sell (or buy) multiple differentiated goods. It allows all participants to express their preferences between varieties, as well as for alternative quantities of specific varieties. Bidders simultaneously make sets of bids. Each of a bidder’s bids can be an OR” bid that offers a different price for each different variety, and the auction then accepts at most one of the offers from each bid (whichever is best for the bidder given the prices that the auction sets). The graphical solution method makes the operation and merits of the auction easy to explain. The auction is more efficient, and less sensitive to market power, than either running a separate auction for each different variety or running a combined auction with predetermined price differences between varieties. It is also faster, less vulnerable to collusion, and can be easier to use and understand than a simultaneous multiple round auction (SMRA). Moreover, unlike in an SMRA, the auctioneer can specify how the quantities to be sold will depend on the auction prices, by choosing supply functions across varieties. Related material is at www.paulklemperer.org. I invented the auction for the Bank of England when it consulted me at the beginning of the financial crisis in 2007. It now uses it regularly to auction loans of funds secured against different varieties of collateral. The Bank’s first implementation corresponds closely to the description in section 2; the then-Governor, Mervyn King, told the Economist that “[the Product-Mix Auction] is a marvellous application of theoretical economics to a practical problem of vital importance to financial markets” I also advised the Bank on the updated version it introduced in 2014. This permits more dimensions (i.e., more “varieties” of goods), and also allocates an endogenous total quantity. Simple linear-programming methods are now used to solve the auction. The current Governor, Mark Carney, announced plans for greater use of the auction. Future auctions may use others of the enhancements described in section 3. The Guardian newspaper published a 5 minute video including an interview with then-Deputy Governor, Paul Tucker here: www.economics.ox.ac.uk/index.php/General-News/how-geometry-came-to-the-rescue-during-the-banking-crisis-video

Optimal Bundling Strategies in Multiobject Auctions of Complements or Substitutes

We consider a problem at the interface of auctions and bundling. Our revenue-maximizing seller seeking to auction one unit each of two complements or substitutes in the best-of-three formats: the auction of the bundle, separate auctions of the individual items, and a combinatorial auction. We draw on an analytical model to address the following questions: (i) Which of the auctioning strategies is optimal under the second-price, sealed-bid format? (ii) What is the optimal strategy for the bidders? (iii) When the objects are asymmetrically valued (e.g., Super Bowl ticket versus souvenir), what is the optimal auctioning sequence under the pure components strategy? Our results suggest that separate auctions of the two objects are superior to the auction of the bundle for most substitutes and even moderate complements when there are at least four bidders. The auction of the pure bundle is better suited for strong complements or with too few bidders. When the combinatorial auction is an available option, it weakly dominates the auction of the pure bundle but has domains of inferiority relative to the separate auctions. When the objects are asymmetric in value, it is optimal to auction the higher-valued object first.

Parasitism and Internet auction fraud: An exploration

Most research on Internet auction fraud focuses exclusively on the relationship between the con-artist and victim. However, the con-artist and victim are situated in an ecology comprising the auction house, police, and auction community. This paper employs the ‘parasite’ metaphor as a way of building theory about Internet auction fraud. We begin by describing the parasite metaphor. We then introduce three theories from the parasitism literature and demonstrate the insights these theories can produce. The first theory, the competitive exclusion principle, highlights how separate auction markets evolve their own species or types of fraud. It also warns us that fraud elimination may be neither desirable nor feasible relative to constraining fraud to acceptable levels. The second theory details various parasite infection mechanisms to show that on-line fraud is composed of two processes; the actual deception and escape. Finally, virulence theory provides one way to predict how much harm a particular kind of fraud will cause to an individual victim. Virulence theory is also used to suggest that the auction infrastructure encourages low virulence vis-à-vis other kinds of fraud like Nigerian letter fraud.

Creating competition out of thin air: An experimental study of right-to-choose auctions

This paper presents an experimental study of a mechanism that is commonly used to sell multiple heterogeneous goods. The novel feature of this procedure is that instead of selling each good in a separate auction, the seller executes a single auction in which buyers, who may be interested in completely different goods, compete for the right to choose a good. We provide experimental evidence that a Right-to-Choose (RTC) auction can generate more revenue than the theoretically optimal auction. Moreover, in contrast to the “optimal” auction, the RTC auction is approximately efficient in the sense that the surplus it generates is close to the maximal one. Furthermore, a seller who would like to retain some of his goods can generate more revenue with a restricted RTC auction in which not all rights-to-choose are sold, than with the theoretically optimal auction.

Trading mechanisms and interday and intraday volatility in an order-driven market with a separate auction opening procedure

Trading mechanisms and interday and intraday volatility in an order-driven market with a separate auction opening procedure

Bundling and the Reduction of the Winner's Curse

The paper studies the effects of bundling on the bidding strategies and seller revenues in auctions when the bidders have common values for the objects. Bundling of objects before the auction reduces the problem of the winner's curse, and the bidders bid more aggressively. This does not mean that a bundled auction is always better for the seller's revenue. Indeed, there is another effect that makes the bundled auction preferable (from the seller's standpoint) if and only if the number of bidders is small. While this is the only effect present in an independent‐private‐values model, it does not vanish when bidders have pure common values for the objects. The paper concludes that a bundled auction is unambiguously better for the seller than separate auctions when the number of bidders is small.

When demand-side management competes in an electric resource solicitation: Issues from a case study in New York

In this study we analyse a New York utility's integrated bidding programme, focusing on the techniques used to incorporate demand-side management (DSM) options. The utility relied on a two-stage bid evaluation process. In the first stage, an objective self-scoring system was employed, where points were awarded for price and other attributes of DSM and supply proposals. A short list of projects was selected, which were then subjected to more detailed analysis by the utility. Several additional screening criteria were used in the evaluation of DSM bids, including technical and economic feasibility, riskiness, and potential impact on the company's own DSM programmes. Out of the 33 DSM bids originally submitted (for a total of 163 MW), 30 made it through the first stage, but only seven survived the second stage (for a total of 36 MW). The scoring system did not effectively discriminate among or adequately value DSM bids, primarily because it was designed to evaluate supply-side projects. In the second stage, the utility evaluation process was too stringent in eliminating DSM bids that potentially competed with utility DSM programmes or overlapped with other DSM bids. To avoid these problems in future solicitations conducted by this or other utilities, we recommend that separate auctions be held for supply and demand resources, that DSM bid evaluation criteria be tailored to the characteristics of the DSM resource, that contract negotiations be more heavily relied upon to resolve issues between the utility and bidders, and that utilities consider partnerships between themselves and third-party DSM providers in implementing their DSM programmes as an alternative to bidding programmes such as the one discussed here.