Richard Steinberg | London School of Economics and Political Science (original) (raw)

Papers by Richard Steinberg

Information Systems Research, 2021

Combinatorial auctions are auctions in which bids can be submitted on sets of items, rather than ... more Combinatorial auctions are auctions in which bids can be submitted on sets of items, rather than just on individual items. These auctions are generally beneficial to both auctioneers and bidders, as they allow bidders to express their synergies for sets of items. In recent years, we have seen the advent of combinatorial auctions as well as the emergence of online market platforms with competing auctioneers. However, combinatorial auctions have largely been absent from these platforms. Our article provides an explanation for this absence by demonstrating that competition between auctioneers can reduce the attractiveness of offering combinatorial auctions. Specifically, we show that auctioneers can limit competitive pressure between themselves by allowing bids only on specific packages, where these packages differ between auctioneers. This results in market segmentation, which increases bidder competition, and consequently increases auctioneer revenues. These findings have implication...

We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, an... more We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, and model the interaction among the users as a game. We propose a decentralized algorithm for the users that is based on the history of the price process, where user response to congestion prices is analogous to “fictitious play” in game theory, and show that this results in convergence to the unique Wardrop equilibrium. We further show that the Wardrop equilibrium coincides with the welfare maximizing capacity allo-

We show that in a duopoly operating in a congested market, with a general congestion function and... more We show that in a duopoly operating in a congested market, with a general congestion function and an arbitrary distribution of consumer disutility for congestion, there cannot exist an asymmetric Nash equilibrium. We also show that whenever an equilibrium does exist it is unique. Closed form expressions for the symmetric equilibrium prices and profits are provided. JEL Classification Numbers: C72, D43.

2010 Proceedings IEEE INFOCOM, 2010

Proceedings IEEE INFOCOM 2001. Conference on Computer Communications. Twentieth Annual Joint Conference of the IEEE Computer and Communications Society (Cat. No.01CH37213)

Operations Research, 2007

We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, an... more We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, and model the interaction among the users as a game. We propose a decentralized algorithm for the users that is based on the history of the price process, where user response to congestion prices is analogous to “fictitious play” in game theory, and show that this results in convergence to the unique Wardrop equilibrium. We further show that the Wardrop equilibrium coincides with the welfare-maximizing capacity allocation.

Management Science, 2007

In a recent paper, the first three authors proposed a method for determining how much to charge u... more In a recent paper, the first three authors proposed a method for determining how much to charge users of a communication network when they share bandwidth, and studied the existence and form of Nash equilibria for players’ choices of capacity. However, the proof of one of the propositions in that paper contained a flaw. In this note, we prove that the original proposition is true under an additional condition, and provide two examples to show that this condition is necessary.

Management Science, 1991

We model joint production-marketing strategies for two firms with asymmetric production cost stru... more We model joint production-marketing strategies for two firms with asymmetric production cost structures in competition. The first firm, called the “Production-smoother,” faces a convex production cost and a linear inventory holding cost. The second firm, called the “Order-taker,” faces a linear production cost and holds no inventory. Each firm is assumed to vary continuously over time both its production rate and its price in view of an unstable “surge” pattern of demand. The underlying theoretical motivation is to investigate the temporal nature of the equilibrium policies of two competing firms, one operating at or near capacity (the Production-smoother), and one operating significantly below capacity (the Order-taker). We characterize and compare the equilibrium strategies of the two competing firms. Among our results, we show that if the duopolistic Production-smoother finds it optimal to hold inventory, then he will begin the season by building up inventory, continue by drawing...

Journal of Combinatorial Theory, Series B, 1980

There exists a path-connected dability is undecidable. subspace of the plane for which graph embe... more There exists a path-connected dability is undecidable. subspace of the plane for which graph embed-From Edmonds' Permutation Theorem ([ 3, 11) and a generalization due to Stahl [6], it follows that graph embeddability is decidable for all surfaces, orientable as well as nonorientable. We show the existence of a topological space G such that there is no algorithm to decide whether a finite graph is embeddable in G. In fact, G will be a path-connected subspace of the real plane. We begin by defining a set S of disjoint graphs G,, n > 3. The graph G, is obtained from the n-cycle C, by replacing each edge by two parallel edges. Clearly, each G, is 2-connected and planar. In addition, these graphs have a useful property which we prove as a lemma. LEMMA 1. No subdivision of G, is isomorphic to a subgraph of G, for m # n. Proof. This follows easily from the observation that, for each G,, every pair of adjacent vertices is connected by three disjoint paths, while nonadjacent vertices are connected by only two disjoint paths. 4

Two mechanisms have been created to support carbon capture and storage (CCS) technologies at the ... more Two mechanisms have been created to support carbon capture and storage (CCS) technologies at the European Union-level-stimulus spending of up to €180 million for one project in selected member states and allocation of up to 45 million EU-ETS allowances (EUAs) per demonstration project from a total pot of 300 million allowances. We identify a number of key risks in designing the project selection process including the carbon price risk, the variable cost risk, technological risk and inefficiencies including asymmetric information and collusion. A Technology Category Auction (TCA) would deliver learning from diversity rather than replication, which is more appropriate for the CCS demonstration phase. To be effective, however, the TCA will require a number of demonstration projects in line with EU objectives of 10-12 plants deployed by 2015. Policy background In 2007, the European Union's heads of government agreed to deploy up to 12 commercialscale integrated CO 2 capture and storage (CCS) demonstration projects across Europe by 2015. To encourage that deployment, the EU has recently agreed to two mechanisms for supporting CCS projects: (i) using 300 million emissions allowances (EUAs) set aside for CCS and innovative renewable technologies and (ii) allocating €1.05 billion of the European Economic Recovery Plan (EERP)'s stimulus spending during 2009/10 on CCS projects from a specified list of projects in seven member states, including €180 million each for projects in Germany, UK, the Netherlands, Poland and Spain, €100 million in Italy and €50 million in France. These EU-level mechanisms will interact with domestic support mechanisms such as the UK CCS Competition in determining the number and nature of the demonstrations undertaken across the entire EU. Whether explicitly or implicitly, the two EU decision processes and the domestic support mechanisms must ultimately address the question of what are the goals of demonstration, since a particular definition of demonstration will need to be enshrined in the selection process(es) and the decision criteria selected. What should be the basis for selecting projects? There are several lists of criteria that have been assembled, but perhaps the most pertinent set from a European perspective is that of the EU Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP). ZEP

Consider a firm that satisfies its demand for a specified time period by assigning it to a suppli... more Consider a firm that satisfies its demand for a specified time period by assigning it to a supplier via a procurement (reverse) auction; call this the standard auction. The firm is considering first breaking the demand down into smaller time periods and permitting bids for one or more of these sub-periods, either as independent bids or as package bids; call this the unbundled auction. Choosing the unbundled auction over the standard auction will tend to: (1) allow each supplier to choose a production plan in which it can satisfy buyer demand at lower cost, (2) increase competition among the suppliers, and (3) allow the buyer to combine bids from different suppliers in order to lower its purchase cost. All

gtcenter.org

Consider a firm, called the buyer, which assigns orders to its suppliers via a Vickrey auction. W... more Consider a firm, called the buyer, which assigns orders to its suppliers via a Vickrey auction. We will refer to this type of procurement auction as a bundle auction, since the demand might in fact be an aggregate of demand over multiple time periods. In the scenario we ...

IEEE/ACM Transactions on Networking, 2020

We examine competition between two Internet Service Providers (ISPs), where the first ISP provide... more We examine competition between two Internet Service Providers (ISPs), where the first ISP provides basic Internet service, while the second ISP provides Internet service plus content, i.e., enhanced service, where the first ISP can partner with a Content Provider to provide the same content as the second ISP. When such a partnering arrangement occurs, the Content Provider pays the first ISP a transfer price for delivering the content. Users have heterogeneous preferences, and each in general faces three options: (1) buy basic Internet service from the first ISP; (2) buy enhanced service from the second ISP; or (3) buy enhanced service jointly from the first ISP and the Content Provider. We derive results on the existence and uniqueness of a Nash equilibrium, and provide closed-form expressions for the prices, user masses, and profits of the two ISPs and the Content Provider. When the first ISP has the ability to choose the transfer price, then when congestion is linear in the load, it is never optimal for the first ISP to set a negative transfer price in the hope of attracting more revenue from additional customers desiring enhanced service. Conversely, when congestion is sufficiently super-linear, the optimal strategy for the first ISP is either to set a negative transfer price (subsidizing the Content Provider) or to set a high transfer price that shuts the Content Provider out of the market.

We develop a pricing game modelling a monopoly and an oligopoly of Internet Service Providers sel... more We develop a pricing game modelling a monopoly and an oligopoly of Internet Service Providers selling bandwidth on two complementary segments of a multi-provider communication network. We consider pricing behavior when the oligopolists have previously sold part of their capacity by means of forward contracts, assuming all prices are set simultaneously. We find the equilibria in pure strategies where they exist. Where they do not exist, we find an equilibrium allowing the oligopolists to use mixed strategies. This requires solving an extension of the Bertrand-Edgeworth game with symmetric capacities and asymmetric contracting levels. Although providers have an incentive to sell forward contracts to insure against demand uncertainty, contracting also commits them to lower prices in general. We find that any equilibrium with contracting levels is asymmetric with a unique provider choosing the lowest level of contracting. By refraining from signing too many contracts, this provider guarantees a high general downstream price level at a private cost. An increase in the lowest contracting level results in negative marginal externalities on all other oligopolists. On the other hand, an increase in any other contracting level causes positive marginal externalities.

IEEE/ACM Transactions on Networking, 2012

Congestion-dependent pricing and forward contracts for complementary segments of a communication ... more Congestion-dependent pricing and forward contracts for complementary segments of a communication network. IEEE/ACM Transactions on networking, 20 (2). pp. 436-449.

Management Science, 2000

We describe a discrete-time auction procedure called PAUSE (Progressive Adaptive User Selection E... more We describe a discrete-time auction procedure called PAUSE (Progressive Adaptive User Selection Environment) for use in assigning COLR (Carrier of Last Resort) responsibility for universal service. The auction incorporates synergies by permitting all combinatorial bids, is transparent to the bidders, allows for multiple winners, and minimizes the possibility of bidder collusion. The procedure is computationally tractable for the auctioneer and thus very efficient to run. The inherent computational complexity of combinatorial bidding cannot be eliminated. However, in this auction the computational burden of evaluating synergies rests with the bidders claiming those synergies, while the auctioneer simply checks that a bid is valid.

Games and Economic Behavior, 2015

It is well-known that efficient use of congestible resources can be achieved via marginal pricing... more It is well-known that efficient use of congestible resources can be achieved via marginal pricing; however, payments collected from the agents generate a budget surplus, which reduces social welfare. We show that an asymptotically first-best solution in the number of agents can be achieved by the appropriate redistribution of the budget surplus back to the agents.

Combinatorial Auctions, 2005

We propose the clock-proxy auction as a practical means for auctioning many related items. A cloc... more We propose the clock-proxy auction as a practical means for auctioning many related items. A clock auction phase is followed by a last-and-final proxy round. The approach combines the simple and transparent price discovery of the clock auction with the efficiency of the proxy auction. Linear pricing is maintained as long as possible, but then is abandoned in the proxy round to improve efficiency and enhance seller revenues. The approach has many advantages over the simultaneous ascending auction. In particular, the clock-proxy auction has no exposure problem, eliminates incentives for demand reduction, and prevents most collusive bidding strategies. * This research was inspired by the Federal Communications Commission's efforts to develop a practical combinatorial auction for its spectrum auctions. We are especially grateful to Evan Kwerel for his insights and encouragement.

Combinatorial Auctions, 2005

The simultaneous ascending auction has proved to be a successful method of auctioning many relate... more The simultaneous ascending auction has proved to be a successful method of auctioning many related items. Simultaneous sale and ascending bids promote price discovery, which helps bidders build desirable packages of items. Although package bids are not allowed, the auction format does handle mild complementarities well. I examine the auction design and its performance in practice. 1 Introduction This chapter examines one of the most successful methods for auctioning many related items-the simultaneous ascending auction. This auction form was first developed for the U.S. Federal Communications Commission's spectrum auctions, beginning in July 1994, and has subsequently been adopted with slight variation for dozens of spectrum auctions worldwide, resulting in revenues in excess of $200 billion. The method, first proposed by Paul Milgrom, Robert Wilson, and Preston McAfee, has been refined with experience, and extended to the sale of divisible goods in electricity, gas, and environmental markets. Here I describe the method and its extensions, provide evidence of its success, and suggest what we can learn from the years of experience conducting simultaneous ascending auctions. It might seem odd for the simultaneous ascending auction to appear as a method for combinatorial auctions, since a key feature of the simultaneous ascending auction, at least in its basic form, is the requirement that bids be for individual items, rather than packages of items. As a result, the simultaneous ascending auction exposes bidders to the possibility that they will win some, but not all, of what they desire. In contrast, all the other combinatorial auction methods discussed in this book, eliminate this exposure problem by allowing bidders to bid on packages of items. Nonetheless, I view the simultaneous ascending auction, not as a historical curiosity to be supplanted by more powerful combinatorial methods, but as an essential method any auction designer should have in his toolkit. The simultaneous ascending auction (and its variants) will remain the best method for auctioning many related items in a wide range of circumstances, even settings where some of the goods are complements for some bidders, so the exposure problem is a real concern.

International Series in Quantitative Marketing

Information Systems Research, 2021

Combinatorial auctions are auctions in which bids can be submitted on sets of items, rather than ... more Combinatorial auctions are auctions in which bids can be submitted on sets of items, rather than just on individual items. These auctions are generally beneficial to both auctioneers and bidders, as they allow bidders to express their synergies for sets of items. In recent years, we have seen the advent of combinatorial auctions as well as the emergence of online market platforms with competing auctioneers. However, combinatorial auctions have largely been absent from these platforms. Our article provides an explanation for this absence by demonstrating that competition between auctioneers can reduce the attractiveness of offering combinatorial auctions. Specifically, we show that auctioneers can limit competitive pressure between themselves by allowing bids only on specific packages, where these packages differ between auctioneers. This results in market segmentation, which increases bidder competition, and consequently increases auctioneer revenues. These findings have implication...

We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, an... more We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, and model the interaction among the users as a game. We propose a decentralized algorithm for the users that is based on the history of the price process, where user response to congestion prices is analogous to “fictitious play” in game theory, and show that this results in convergence to the unique Wardrop equilibrium. We further show that the Wardrop equilibrium coincides with the welfare maximizing capacity allo-

We show that in a duopoly operating in a congested market, with a general congestion function and... more We show that in a duopoly operating in a congested market, with a general congestion function and an arbitrary distribution of consumer disutility for congestion, there cannot exist an asymmetric Nash equilibrium. We also show that whenever an equilibrium does exist it is unique. Closed form expressions for the symmetric equilibrium prices and profits are provided. JEL Classification Numbers: C72, D43.

2010 Proceedings IEEE INFOCOM, 2010

Proceedings IEEE INFOCOM 2001. Conference on Computer Communications. Twentieth Annual Joint Conference of the IEEE Computer and Communications Society (Cat. No.01CH37213)

Operations Research, 2007

We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, an... more We consider congestion pricing as a mechanism for sharing bandwidth in communication networks, and model the interaction among the users as a game. We propose a decentralized algorithm for the users that is based on the history of the price process, where user response to congestion prices is analogous to “fictitious play” in game theory, and show that this results in convergence to the unique Wardrop equilibrium. We further show that the Wardrop equilibrium coincides with the welfare-maximizing capacity allocation.

Management Science, 2007

In a recent paper, the first three authors proposed a method for determining how much to charge u... more In a recent paper, the first three authors proposed a method for determining how much to charge users of a communication network when they share bandwidth, and studied the existence and form of Nash equilibria for players’ choices of capacity. However, the proof of one of the propositions in that paper contained a flaw. In this note, we prove that the original proposition is true under an additional condition, and provide two examples to show that this condition is necessary.

Management Science, 1991

We model joint production-marketing strategies for two firms with asymmetric production cost stru... more We model joint production-marketing strategies for two firms with asymmetric production cost structures in competition. The first firm, called the “Production-smoother,” faces a convex production cost and a linear inventory holding cost. The second firm, called the “Order-taker,” faces a linear production cost and holds no inventory. Each firm is assumed to vary continuously over time both its production rate and its price in view of an unstable “surge” pattern of demand. The underlying theoretical motivation is to investigate the temporal nature of the equilibrium policies of two competing firms, one operating at or near capacity (the Production-smoother), and one operating significantly below capacity (the Order-taker). We characterize and compare the equilibrium strategies of the two competing firms. Among our results, we show that if the duopolistic Production-smoother finds it optimal to hold inventory, then he will begin the season by building up inventory, continue by drawing...

Journal of Combinatorial Theory, Series B, 1980

There exists a path-connected dability is undecidable. subspace of the plane for which graph embe... more There exists a path-connected dability is undecidable. subspace of the plane for which graph embed-From Edmonds' Permutation Theorem ([ 3, 11) and a generalization due to Stahl [6], it follows that graph embeddability is decidable for all surfaces, orientable as well as nonorientable. We show the existence of a topological space G such that there is no algorithm to decide whether a finite graph is embeddable in G. In fact, G will be a path-connected subspace of the real plane. We begin by defining a set S of disjoint graphs G,, n > 3. The graph G, is obtained from the n-cycle C, by replacing each edge by two parallel edges. Clearly, each G, is 2-connected and planar. In addition, these graphs have a useful property which we prove as a lemma. LEMMA 1. No subdivision of G, is isomorphic to a subgraph of G, for m # n. Proof. This follows easily from the observation that, for each G,, every pair of adjacent vertices is connected by three disjoint paths, while nonadjacent vertices are connected by only two disjoint paths. 4

Two mechanisms have been created to support carbon capture and storage (CCS) technologies at the ... more Two mechanisms have been created to support carbon capture and storage (CCS) technologies at the European Union-level-stimulus spending of up to €180 million for one project in selected member states and allocation of up to 45 million EU-ETS allowances (EUAs) per demonstration project from a total pot of 300 million allowances. We identify a number of key risks in designing the project selection process including the carbon price risk, the variable cost risk, technological risk and inefficiencies including asymmetric information and collusion. A Technology Category Auction (TCA) would deliver learning from diversity rather than replication, which is more appropriate for the CCS demonstration phase. To be effective, however, the TCA will require a number of demonstration projects in line with EU objectives of 10-12 plants deployed by 2015. Policy background In 2007, the European Union's heads of government agreed to deploy up to 12 commercialscale integrated CO 2 capture and storage (CCS) demonstration projects across Europe by 2015. To encourage that deployment, the EU has recently agreed to two mechanisms for supporting CCS projects: (i) using 300 million emissions allowances (EUAs) set aside for CCS and innovative renewable technologies and (ii) allocating €1.05 billion of the European Economic Recovery Plan (EERP)'s stimulus spending during 2009/10 on CCS projects from a specified list of projects in seven member states, including €180 million each for projects in Germany, UK, the Netherlands, Poland and Spain, €100 million in Italy and €50 million in France. These EU-level mechanisms will interact with domestic support mechanisms such as the UK CCS Competition in determining the number and nature of the demonstrations undertaken across the entire EU. Whether explicitly or implicitly, the two EU decision processes and the domestic support mechanisms must ultimately address the question of what are the goals of demonstration, since a particular definition of demonstration will need to be enshrined in the selection process(es) and the decision criteria selected. What should be the basis for selecting projects? There are several lists of criteria that have been assembled, but perhaps the most pertinent set from a European perspective is that of the EU Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP). ZEP

Consider a firm that satisfies its demand for a specified time period by assigning it to a suppli... more Consider a firm that satisfies its demand for a specified time period by assigning it to a supplier via a procurement (reverse) auction; call this the standard auction. The firm is considering first breaking the demand down into smaller time periods and permitting bids for one or more of these sub-periods, either as independent bids or as package bids; call this the unbundled auction. Choosing the unbundled auction over the standard auction will tend to: (1) allow each supplier to choose a production plan in which it can satisfy buyer demand at lower cost, (2) increase competition among the suppliers, and (3) allow the buyer to combine bids from different suppliers in order to lower its purchase cost. All

gtcenter.org

Consider a firm, called the buyer, which assigns orders to its suppliers via a Vickrey auction. W... more Consider a firm, called the buyer, which assigns orders to its suppliers via a Vickrey auction. We will refer to this type of procurement auction as a bundle auction, since the demand might in fact be an aggregate of demand over multiple time periods. In the scenario we ...

IEEE/ACM Transactions on Networking, 2020

We examine competition between two Internet Service Providers (ISPs), where the first ISP provide... more We examine competition between two Internet Service Providers (ISPs), where the first ISP provides basic Internet service, while the second ISP provides Internet service plus content, i.e., enhanced service, where the first ISP can partner with a Content Provider to provide the same content as the second ISP. When such a partnering arrangement occurs, the Content Provider pays the first ISP a transfer price for delivering the content. Users have heterogeneous preferences, and each in general faces three options: (1) buy basic Internet service from the first ISP; (2) buy enhanced service from the second ISP; or (3) buy enhanced service jointly from the first ISP and the Content Provider. We derive results on the existence and uniqueness of a Nash equilibrium, and provide closed-form expressions for the prices, user masses, and profits of the two ISPs and the Content Provider. When the first ISP has the ability to choose the transfer price, then when congestion is linear in the load, it is never optimal for the first ISP to set a negative transfer price in the hope of attracting more revenue from additional customers desiring enhanced service. Conversely, when congestion is sufficiently super-linear, the optimal strategy for the first ISP is either to set a negative transfer price (subsidizing the Content Provider) or to set a high transfer price that shuts the Content Provider out of the market.

We develop a pricing game modelling a monopoly and an oligopoly of Internet Service Providers sel... more We develop a pricing game modelling a monopoly and an oligopoly of Internet Service Providers selling bandwidth on two complementary segments of a multi-provider communication network. We consider pricing behavior when the oligopolists have previously sold part of their capacity by means of forward contracts, assuming all prices are set simultaneously. We find the equilibria in pure strategies where they exist. Where they do not exist, we find an equilibrium allowing the oligopolists to use mixed strategies. This requires solving an extension of the Bertrand-Edgeworth game with symmetric capacities and asymmetric contracting levels. Although providers have an incentive to sell forward contracts to insure against demand uncertainty, contracting also commits them to lower prices in general. We find that any equilibrium with contracting levels is asymmetric with a unique provider choosing the lowest level of contracting. By refraining from signing too many contracts, this provider guarantees a high general downstream price level at a private cost. An increase in the lowest contracting level results in negative marginal externalities on all other oligopolists. On the other hand, an increase in any other contracting level causes positive marginal externalities.

IEEE/ACM Transactions on Networking, 2012

Congestion-dependent pricing and forward contracts for complementary segments of a communication ... more Congestion-dependent pricing and forward contracts for complementary segments of a communication network. IEEE/ACM Transactions on networking, 20 (2). pp. 436-449.

Management Science, 2000

We describe a discrete-time auction procedure called PAUSE (Progressive Adaptive User Selection E... more We describe a discrete-time auction procedure called PAUSE (Progressive Adaptive User Selection Environment) for use in assigning COLR (Carrier of Last Resort) responsibility for universal service. The auction incorporates synergies by permitting all combinatorial bids, is transparent to the bidders, allows for multiple winners, and minimizes the possibility of bidder collusion. The procedure is computationally tractable for the auctioneer and thus very efficient to run. The inherent computational complexity of combinatorial bidding cannot be eliminated. However, in this auction the computational burden of evaluating synergies rests with the bidders claiming those synergies, while the auctioneer simply checks that a bid is valid.

Games and Economic Behavior, 2015

It is well-known that efficient use of congestible resources can be achieved via marginal pricing... more It is well-known that efficient use of congestible resources can be achieved via marginal pricing; however, payments collected from the agents generate a budget surplus, which reduces social welfare. We show that an asymptotically first-best solution in the number of agents can be achieved by the appropriate redistribution of the budget surplus back to the agents.

Combinatorial Auctions, 2005

We propose the clock-proxy auction as a practical means for auctioning many related items. A cloc... more We propose the clock-proxy auction as a practical means for auctioning many related items. A clock auction phase is followed by a last-and-final proxy round. The approach combines the simple and transparent price discovery of the clock auction with the efficiency of the proxy auction. Linear pricing is maintained as long as possible, but then is abandoned in the proxy round to improve efficiency and enhance seller revenues. The approach has many advantages over the simultaneous ascending auction. In particular, the clock-proxy auction has no exposure problem, eliminates incentives for demand reduction, and prevents most collusive bidding strategies. * This research was inspired by the Federal Communications Commission's efforts to develop a practical combinatorial auction for its spectrum auctions. We are especially grateful to Evan Kwerel for his insights and encouragement.

Combinatorial Auctions, 2005

The simultaneous ascending auction has proved to be a successful method of auctioning many relate... more The simultaneous ascending auction has proved to be a successful method of auctioning many related items. Simultaneous sale and ascending bids promote price discovery, which helps bidders build desirable packages of items. Although package bids are not allowed, the auction format does handle mild complementarities well. I examine the auction design and its performance in practice. 1 Introduction This chapter examines one of the most successful methods for auctioning many related items-the simultaneous ascending auction. This auction form was first developed for the U.S. Federal Communications Commission's spectrum auctions, beginning in July 1994, and has subsequently been adopted with slight variation for dozens of spectrum auctions worldwide, resulting in revenues in excess of $200 billion. The method, first proposed by Paul Milgrom, Robert Wilson, and Preston McAfee, has been refined with experience, and extended to the sale of divisible goods in electricity, gas, and environmental markets. Here I describe the method and its extensions, provide evidence of its success, and suggest what we can learn from the years of experience conducting simultaneous ascending auctions. It might seem odd for the simultaneous ascending auction to appear as a method for combinatorial auctions, since a key feature of the simultaneous ascending auction, at least in its basic form, is the requirement that bids be for individual items, rather than packages of items. As a result, the simultaneous ascending auction exposes bidders to the possibility that they will win some, but not all, of what they desire. In contrast, all the other combinatorial auction methods discussed in this book, eliminate this exposure problem by allowing bidders to bid on packages of items. Nonetheless, I view the simultaneous ascending auction, not as a historical curiosity to be supplanted by more powerful combinatorial methods, but as an essential method any auction designer should have in his toolkit. The simultaneous ascending auction (and its variants) will remain the best method for auctioning many related items in a wide range of circumstances, even settings where some of the goods are complements for some bidders, so the exposure problem is a real concern.

International Series in Quantitative Marketing