Abstract
We analyze an ascending auction with anonymous item- prices, when there are two items that are substitutes. This popular auction format entails increased opportunities for bidders to coordinate bids, as the bidding process is longer, and since bidders see the other bids and can respond to various signaling. This has happened in many real auctions, e.g., in the Netherlands 3G Telecom Auction and in the FCC auctions in the US.
While on the face of it, such bidding behavior seems to harm economic efficiency, we show that side-communication may actually improve the social efficiency of the auction: We describe an ex-post sub-game perfect equilibrium, that uses limited side-communication, and is ex-post efficient. In contrast, without side-communication, we show that there is no ex-post equilibrium which is ex-post efficient in the ascending auction.
In the equilibrium strategy we suggest, bidders start by reporting their true demands at the first stages of the auction, and then perform a single demand reduction at a certain concrete point, determined using a single message exchanged between the bidders. We show that this limited signaling opportunity resolves the strategic problems of myopic bidding, and, quite surprisingly, improves social welfare instead of harming it.
Keywords
Download to read the full chapter text
Chapter PDF
Similar content being viewed by others
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2012 ICST Institute for Computer Science, Social Informatics and Telecommunications Engineering
About this paper
Cite this paper
Lavi, R., Oren, S. (2012). Side-Communication Yields Efficiency of Ascending Auctions: The Two-Items Case. In: Coles, P., Das, S., Lahaie, S., Szymanski, B. (eds) Auctions, Market Mechanisms, and Their Applications. AMMA 2011. Lecture Notes of the Institute for Computer Sciences, Social Informatics and Telecommunications Engineering, vol 80. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30913-7_14
Download citation
DOI: https://doi.org/10.1007/978-3-642-30913-7_14
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-30912-0
Online ISBN: 978-3-642-30913-7
eBook Packages: Computer ScienceComputer Science (R0)