The Combinatorial Clock Auction
https://www.gsb.stanford.edu/insights/how-smart-bidders-can-manipulate-massive-auctions
In this article the writer describes a very complex auction that is used in selling wireless and broadcast spectrum. This type of auction involves initial multi-round stage of bidders publicly declaring their interest in bundled packages of spectrum at different price points, followed by a second round of sealed bids. Since it’s first use in 2005, there has been a trend where one company would end up paying much less than its competitors despite winning similar amounts or even larger amounts of spectrum. Levin and Skrzypacz, from Stanford, have found that this type of auction can be manipulated to some extent by the bidders. Bidders can bid more or less aggressively in these multi-round bids. Bidders have the ability to observe their competitors and infer things about the final bids. Thus creating and incentive to for predatory bidders to drive up the price of a specific package. In response, bidders that expect these predators may alter their auction plan further throwing off the equilibrium in this auction.
In class we’ve discussed several types of auctions such as ascending and descending auctions. We’ve also explored the strategies behind all these auction types and what values should bidders bid in each scenario. For example, in a 2nd price ascending bid auction, each bidder should bid their true value to optimize their payoff. If they bid lower than their true value, there is a chance that they will lose the auction to a bid that may still be within their true value. If the bidder bids above their true value, then there’s a chance that the bidder will pay more than his true valuation if the bidder wins. Although compared to the Combinatorial Clock Auction, the strategies of these auctions are not very dependent on another bidder and there isn’t much psychological warfare that is involved that could change a bidder’s decision or outcome.