Strongactivityrulesforiterativecombinatorialauctions

Activityruleshaveemergedinrecentyearsasanimportantaspectofpracticalauctiondesign.Therole of anactivityruleinaniterativeauctionistosuppressstrategicbehaviorbybiddersandpromote simple,continual,meaningfulbiddingandthus,pricediscovery.Theserulesfindapplicationinthe design ofiterativecombinatorialauctionsforrealworldscenarios,forexampleinspectrumauctions,in airline landingslotauctions,andinprocurementauctions.Weintroducethenotionof strong activity rules, whichallowsimple,consistentbiddingstrategieswhileprecludingallbehaviorsthatcannotbe rationalized inthisway.Wedesignsucharuleforauctionswithbudget-constrainedbidders,i.e., bidderswithvaluationsforresourcesthataregreaterthantheirabilitytopay.Suchbiddersareof practical importanceinmanymarketenvironments,andhinderedfrombiddinginasimpleand consistent waybythecommonlyused revealed-preferenceactivityrule, whichistoostronginsuchan environment. Weconsiderissuesofcomplexity,andprovidetwousefulformsofinformationfeedback to guidebiddersinmeetingstrongactivityrules.Asaspecialcase,wederiveastrongactivityrulefor non-budget-constrainedbidders.Theultimatechoiceofactivityrulemustdepend,inpart,onbeliefs aboutthetypesofbidderslikelytoparticipateinanauctioneventbecauseonecannothavearulethatis simultaneouslystrongforbothbudget-constrainedbiddersandquasi-linearbidders.