Competing Combinatorial Auctions

Author:

Kittsteiner Thomas1ORCID,Ott Marion2ORCID,Steinberg Richard3ORCID

Affiliation:

1. School of Business and Economics, RWTH Aachen University, 52056 Aachen, Germany;

2. ZEW – Leibniz Centre for European Economic Research, 68161 Mannheim, Germany;

3. Department of Management, London School of Economics and Political Science, London WC2A 2AE, United Kingdom

Abstract

Combinatorial auctions are auctions in which bids can be submitted on sets of items, rather than just on individual items. These auctions are generally beneficial to both auctioneers and bidders, as they allow bidders to express their synergies for sets of items. In recent years, we have seen the advent of combinatorial auctions as well as the emergence of online market platforms with competing auctioneers. However, combinatorial auctions have largely been absent from these platforms. Our article provides an explanation for this absence by demonstrating that competition between auctioneers can reduce the attractiveness of offering combinatorial auctions. Specifically, we show that auctioneers can limit competitive pressure between themselves by allowing bids only on specific packages, where these packages differ between auctioneers. This results in market segmentation, which increases bidder competition, and consequently increases auctioneer revenues. These findings have implications for market design. In particular they imply that, for an online market platform having multiple sellers offering auctions to the same set of buyers, it might not be advantageous to offer combinatorial auctions as a design option to the competing sellers.

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Subject

Library and Information Sciences,Information Systems and Management,Computer Networks and Communications,Information Systems,Management Information Systems

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