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A New and Improved Design for Multiobject Iterative Auctions

Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802
Division of the Humanities and Social Sciences, California Institute of Technology, Pasadena, California 91125
Interdisciplinary Center for Economic Science, George Mason University, Fairfax, Virginia 22030
RAND, Santa Monica, California 90407
kwasnica{at}psu.edu
jledyard{at}hss.caltech.edu
dporter4{at}gmu.edu
martini{at}rand.org

In this paper we present a new improved design for multiobject auctions and report on the results of experimental tests of that design. We merge the better features of two extant but very different auction processes, the Simultaneous Multiple Round (SMR) design used by the FCC to auction the electromagnetic spectrum and the Adaptive User Selection Mechanism (AUSM) of Banks et al. (1989, "Allocating uncertain and unresponsive resources: An experimental approach," RAND Journal of Economics, Vol. 20, No. 1, pp. 1–25). Then, by adding one crucial new feature, we are able to create a new design, the Resource Allocation Design (RAD) auction process, which performs better than both. Our experiments demonstrate that the RAD auction achieves higher efficiencies, lower bidder losses, higher net revenues, and faster times to completion without increasing the complexity of a bidder's problem.

Key Words: auctions; experimental economics; combinatorial auctions
History: Received: May 22, 2002;

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