DP2581 What Really Matters in Auction Design

Author(s): Paul Klemperer
Publication Date: October 2000
Keyword(s): Antitrust, Auction Theory, Auctions, Bidding, Collusion, Electricity, Entry, Entry Deterrence, Mechanism Design, Mobile Phones, Predation, Radiospectrum, Takeovers, Telecommunications, UMTS
JEL(s): D43, D44, L13, L41, L96
Programme Areas: Public Economics, Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2581

The most important issues in auction design are the traditional concerns of competition policy-preventing collusive, predatory, and entry deterring behaviour. Ascending and uniform-price auctions are particularly vulnerable to these problems (we discuss radiospectrum and football TV-rights auctions, electricity markets, and takeover battles), and the Anglo-Dutch auction – a hybrid of the sealed-bid and ascending auctions may often perform better. However, everything depends on the details of the context; the circumstances of the recent UK mobile-phone license auction made an ascending format ideal. We also discuss the current 3G spectrum auctions in Germany and the Netherlands. Auction design is a matter of ‘horses for courses’, not ‘one size fits all’.