Iterative Combinatorial Auctions with Bidder-Determined Combinations

R. H. Kwon (), G. Anandalingam () and L. H. Ungar ()
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R. H. Kwon: Department of Mechanical and Industrial Engineering, University of Toronto, Ontario, Canada, M5S 3G8
G. Anandalingam: The Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742
L. H. Ungar: Department of Computer and Information Science, University of Pennsylvania, Pennsylvania 19104

Management Science, 2005, vol. 51, issue 3, 407-418

Abstract: In combinatorial auctions, multiple distinct items are sold simultaneously and a bidder may place a single bid on a set (package) of distinct items. The determination of packages for bidding is a nontrivial task, and existing efficient formats require that bidders know the set of packages and/or their valuations. In this paper, we extend an efficient ascending combinatorial auction mechanism to use approximate single-item pricing. The single-item prices in each round are derived from a linear program that is constructed to reflect the current allocation of packages. Introduction of approximate single-item prices allows for endogenous bid determination where bidders can discover packages that were not included in the original bid set. Due to nonconvexities, single-item prices may not exist that are exact marginal values. We show that the use of approximate single-item prices with endogenous bidding always produces allocations that are at least as efficient as those from bidding with a fixed set of packages based on package pricing. A network resource allocation example is given that illustrates the benefits of our endogenous bidding mechanism.

Keywords: combinatorial auctions; mathematical programming (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (21)

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