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Exposure Problem in Multi-Unit Auctions

Xin Meng and Hikmet Gunay

No HIAS-E-43, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: We characterize the optimal bidding strategies of local and global bidders for two heterogeneous licenses in a multi-unit simultaneous ascending auction (SAA) like the one used in the 2008 Canadian Advanced Wireless Spectrum license auction. The global bidder wants to win both licenses to enjoy synergies; therefore, she bids more than her stand-alone valuation of a license. This exposes her to the risk of losing money even when she wins all licenses. We determine the optimal bidding strategies in the presence of an exposure problem. By using simulation methods, first, we show that the probability of inefficient allocations in the simultaneous ascending auction can be up to 9 per cent. Second, we show that the global bidder can end up with a loss with 6 per cent probability depending on the distribution. We also investigate the relation between inefficient allocation and the revenue of SAA and VCG auctions.

Keywords: Multi-Unit Auctions; Vickrey Clarke Groves (VCG) mechanism; Exposure Problem; Synergies; Complementarity; Spectrum License Auction (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Pages: 41 p.
Date: 2017-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/28356/1/070_hiasDP-E-43.pdf

Related works:
Working Paper: Exposure Problem in Multi-unit Auctions (2012) Downloads
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