Simultaneous Ascending Auctions with Package Bidding

March 1, 1998

Under certain conditions, two particular auction mechanisms that enable bidders to express complementarities in their valuations have theoretically attractive properties. In theory, a generalized Vickrey auction has desirable efficiency and incentive properties, resolving both the exposure problem and demand reduction problems that we describe in our reports. However, the Vickrey auction also suffers from important problems, including its reliance on price discrimination in favor of large bidders and the practical difficulties of implementing it for auctions for more than a relatively small number of licenses. A simultaneous ascending auction with package bidding has somewhat weaker theoretical efficiency and incentive properties, but potentially provides bidders with greater information about common values, and is generally easier to implement.

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