Characteristics and Economic Consequences of Jump Bids in Combinatorial Auctions
Authors: Sanyal, Pallab
Journal: Information Systems Research (2016)
<jats:p> Jump bidding, which refers to bidding above the minimum necessary, is a robust behavior that has been observed in a variety of ascending auctions in the field as well as the laboratory. However, the phenomenon has yet to be studied in combinatorial auctions, which are a type of multiobject auction that allows bidders to bid on a set of objects. Such auctions have been found to be beneficial when objects exhibit synergy, e.g., are complementary. In this paper, we explore jump bidding behavior in combinatorial auctions as a function of design choices of the mechanism. In particular, we examine the effects of price revelation schemes on the nature and extent of jump bidding. Furthermore, we study the effects of jump bidding on the economic performance of the auctions. To conduct our study, first, we develop hypotheses using auction theories and behavioral theories of how people use reference prices as anchors, and second, we conduct a laboratory experiment to test our hypotheses and examine bidder behavior. We find that the nature of the prices that the auctioneer chooses to offer as feedback to the bidders can considerably influence their jump bidding behavior, leading to s…