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 significant differences in auction outcomes. We demonstrate that in combinatorial auctions, in addition to the theories of jump bidding proposed in the literature, bounded rationality of the bidders plays a part in the nature and extent of jump bidding. Our study reveals that in the cognitively challenging package-bidding environment, bidders often pursue computationally frugal but suboptimal heuristics. Our results have important policy implications for mechanism designers.
Advancements in information technology offer opportunities for designing and deploying innovative market mechanisms that can improve the allocation and procurement processes of businesses. For example, combinatorial auctions-in which bidders can bid on combinations of goods-have been shown to increase the economic efficiency of a trade when goods have complementarities. However, the lack of real-time decision support tools for bidders has prevented this mechanism from reaching its full potential. With the objective of facilitating bidder participation in combinatorial auctions, this study, using recent research in real-time bidder support metrics, discusses several novel feedback schemes that can aid bidders in formulating combinatorial bids in real-time. The feedback schemes allow us to conduct continuous combinatorial auctions, where bidder scan submit bids at any time. Using laboratory experiments with two different setups, we compare the economic performance of the continuous mechanism under three progressively advanced levels of feedback. Our findings indicate that information feedback plays a major role in influencing the economic outcomes of combinatorial auctions. We compare several important bid characteristics to explain the observed differences in aggregate measures. This study advances the ongoing research on combinatorial auctions by developing continuous auctions that differentiate themselves from earlier combinatorial auction mechanisms by facilitating free flowing participation of bidders and providing exact prices of bundles on demand in real time. For practitioners, the study provides insights on how the nature of feedback can influence the economic outcomes of a complex trading mechanism
Electronic auctions are increasingly being used to facilitate the procurement of goods and services in organizations. Multiattribute auctions, which allow bids on multiple dimensions of the product and not just price, are information technology-enabled sourcing mechanisms that can increase the efficiency of procurement for configurable goods and services compared to price-only auctions. Given the strategic nature of procurement auctions, the amount of information concerning the buyer's preferences that is disclosed to the suppliers has implications on the profits of the buyer and the suppliers and, consequently, on the long-term relationship between them. This study explores novel feedback schemes for multisourcing multiattribute auctions that require limited exchange of strategic information between the buyer and the suppliers. To study the impact of feedback on the outcomes and dynamics of the auctions, we conduct laboratory experiments wherein we analyze bidder behavior and economic outcomes under three different treatment conditions with different types of information feedback. Our results indicate that, in contrast to winner-take-all multiattribute auctions, multisourcing multiattribute auctions, with potentially multiple winners, allow bidders (i.e., suppliers) to extract more profit when greater transparency in terms of provisional allocations and prices is provided. We develop several insights for mechanism designers toward developing sustainable procurement auctions that efficiently allocate multiple units of an asset with multiple negotiable attributes among multiple suppliers.