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The effect of bid withdrawal in a multi-object auction

Porter, David P. (1999) The effect of bid withdrawal in a multi-object auction. Review of Economic Design, 4 (1). pp. 73-97. ISSN 1434-4742. doi:10.1007/s100580050027.

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The Federal Communications Commission currently utilizes a simultaneous multi-round ascending bid auction to allocate Personal Communication Services licenses. In the auction, participants are allowed to withdraw standing bids at a penalty. The penalty is equal to the maximum of zero or the difference between the value of the withdrawn bid on a license and the highest bid after the withdrawal on that license. The withdrawal rule is designed to assist bidders wishing to assemble combinations of licenses who find themselves stranded with an assortment of licenses for which their bids sum to more than their value. This paper reports results of experiments that examine the effect of the withdrawal rule in environments in which losses can occur if packages of licenses must be assembled piecemeal. The experiments demonstrate that there is a tradeoff with using the rule: efficiency and revenue increase, but individual losses are larger. Furthermore, the increased efficiency does not outweigh the higher prices paid so that bidder surplus falls in the presence of the withdrawal rule.

Item Type:Article
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Additional Information:© 1999 Springer-Verlag Berlin Heidelberg. Received: 10 October 1997; Accepted: 10 September 1998.
Subject Keywords:Multi-object auctions, experiments, mechanism design
Issue or Number:1
Classification Code:JEL: 72, 82, 92
Record Number:CaltechAUTHORS:20170830-134841373
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Official Citation:Porter, D. Rev Econ Design (1999) 4: 73.
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80972
Deposited By: Tony Diaz
Deposited On:30 Aug 2017 20:57
Last Modified:15 Nov 2021 19:40

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