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Published September 2010 | public
Journal Article

Hierarchical package bidding: A paper & pencil combinatorial auction


We introduce a new combinatorial auction format based on a simple, transparent pricing mechanism tailored for the hierarchical package structure proposed by Rothkopf, Pekeč, and Harstad to avoid computational complexity [Rothkopf, M., Pekeč, A., Harstad, R., 1998, Computationally manageable combinatorial auctions. Manage. Sci. 44, 1131–1147]. This combination provides the feedback necessary for bidders in multi-round auctions to discern winning bidding strategies for subsequent rounds and to coordinate responses to aggressive package bids. The resulting mechanism is compared to two leading alternatives in a series of laboratory experiments involving varying degrees of value synergies. Based on these "wind tunnel" tests the FCC has decided to use hierarchical package bidding in a segment of the upcoming 700 MHz auction.

Additional Information

© 2008 Elsevier Inc. Received 24 December 2007, Available online 3 April 2008. We acknowledge partial financial support from the Federal Communications Commission (FCC contract 05000012), the Alfred P. Sloan Foundation, the Gordon and Betty Moore Foundation, the Gates Grubstake Fund, the National Science Foundation (SBR 0551014), and the Dutch National Science Foundation (NWO-VICI 453.03.606).

Additional details

August 22, 2023
October 23, 2023