Martin, Thomas A., IV (2009-08). Empirical Essays on the Efficiency of Heterogeneous Good Auction. Doctoral Dissertation. Thesis uri icon

abstract

  • A recent pursuit of the auction design literature has been the development of an auction mechanism which performs well in a multi-good setting, when the goods are not substitutes. This work began in earnest with the Federal Communications Commission spectrum license auctions in the early nineties and continues to this day. In a setting in which goods are not substitutes, the value of one good depends nonnegatively on the quantities of other goods that are won. This type of interdependent value structure has proven difficult to account for in auction design. However, the need for mechanisms that account for such a value structure hinges on the magnitude of the interdependence, whose computation is an empirical exercise. I identify a setting in which to perform this computation. I develop an empirical methodology that allows me to recover bidders' value functions in a multi-good auction setting. This methodology allows me to assess the magnitude of any interdependence in the goods? value structure. Since the auction setting that I analyze is a variation of the standard uniform price auction, which has been adapted for a multi-good setting, I am able to measure the benefit of having a direct revelation mechanism. This counterfactual study is performed by maximizing the value of the auction using the recovered bidder value functions. I find evidence that there is an interdependent value structure in the setting. The counterfactual auction finds that the standard uniform price auction, adapted to a multi-good setting, performs poorly in the presence of such a value structure. The setting for this analysis is an auction for financial transmission rights held in Texas in 2002. The auction involved twenty two firms and collected almost $70 million in revenue. This research is the first to empirically assess efficiency in this type of auction setting.
  • A recent pursuit of the auction design literature has been the development of
    an auction mechanism which performs well in a multi-good setting, when the goods
    are not substitutes. This work began in earnest with the Federal Communications
    Commission spectrum license auctions in the early nineties and continues to this day.
    In a setting in which goods are not substitutes, the value of one good depends nonnegatively
    on the quantities of other goods that are won. This type of interdependent
    value structure has proven difficult to account for in auction design. However, the
    need for mechanisms that account for such a value structure hinges on the magnitude
    of the interdependence, whose computation is an empirical exercise. I identify a
    setting in which to perform this computation.
    I develop an empirical methodology that allows me to recover bidders' value
    functions in a multi-good auction setting. This methodology allows me to assess the
    magnitude of any interdependence in the goods? value structure. Since the auction
    setting that I analyze is a variation of the standard uniform price auction, which has
    been adapted for a multi-good setting, I am able to measure the benefit of having a
    direct revelation mechanism. This counterfactual study is performed by maximizing
    the value of the auction using the recovered bidder value functions.
    I find evidence that there is an interdependent value structure in the setting.
    The counterfactual auction finds that the standard uniform price auction, adapted to
    a multi-good setting, performs poorly in the presence of such a value structure. The setting for this analysis is an auction for financial transmission rights held in Texas
    in 2002. The auction involved twenty two firms and collected almost $70 million
    in revenue. This research is the first to empirically assess efficiency in this type of
    auction setting.

publication date

  • August 2009