Mark Gritter (markgritter) wrote,
Mark Gritter
markgritter

Combinatorial Auctions and Implicit Collusion

I am rereading selected bits of "Combinatorial Auctions" in preparation for my session at Minnebar next week.

Here is a completely factual thing that happened in the U.S. government PCS spectrum auction (a simultaneous ascending auction). Bidders who wanted to discourage competition would engage in "code bids" against smaller carriers. Suppose A bid on on a block which B wanted. B then bid on a block for which A was the current leader, and which B had not previously indicated interest. The last three digits of the bid encoded the lot number for which the bid was "punishment."

Source: http://ftp.cramton.umd.edu/papers2000-2004/cramton-schwartz-collusive-bidding.pdf

This tactic appears to have been successful. There is also some evidence of "demand reduction" in which carriers strategically decided not to bid on additional spectrum allocations in order to keep overall price levels lower.
Tags: economics
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