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Exposure Problem in Multi-unit Auctions

Author

Listed:
  • Hikmet Gunay
  • Xin Meng
Abstract
We characterize the optimal bidding strategies of local and global bidders for two heterogenous licenses in a multi-unit simultaneous ascending 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 the frequency of inefficient allocation in the simultaneous ascending auction. Then, we show that the Vickrey-Clarke-Groves (VCG) mechanism may generate more revenue than the simultaneous ascending auction.

Suggested Citation

  • Hikmet Gunay & Xin Meng, 2012. "Exposure Problem in Multi-unit Auctions," ISER Discussion Paper 0848, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0848
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    3. Rosa, Benjamin V., 2022. "Bid credits in simultaneous ascending auctions," Games and Economic Behavior, Elsevier, vol. 132(C), pages 189-203.
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    6. Ehrhart, Karl-Martin & Ott, Marion & Seifert, Stefan & Wang, Runxi, 2024. "Combinatorial auctions for renewable energy — potentials and challenges," Energy Policy, Elsevier, vol. 186(C).

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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