The Over-Concentrating Nature of Simultaneous Ascending Auctions

This paper analyzes simultaneous ascending auctions of two different items, viewed as complements by multi-item bidders. The finding is that such auctions overly concentrate the goods to a multi-item bidder and never overly diffuse them to single-item bidders. The main reason is that some bidders strictly want to jump-bid and jumpbidding allows the game to mimic a package auction, where single-item bidders cannot fully cooperate among themselves to bid against multi-item bidders. The second reason is that over-concentration causes resale and there is an equilibrium where a multi-item bidder becomes the reseller and chooses to under-sell the goods. ∗This is developed from a note “Decentralized Auctions of Complements” presented in the Joint CSIO/IDEI Industrial Organization Workshop in 2004 at Northwestern University. I thank Gregory Pavlov, Gábor Virág, and Michael Whinston for comments, and the NSF for grant SES-0214471. †Department of Economics, Northwestern University, 2003 Sheridan Road, Evanston, IL 60208. Email: [email protected]. Web: http://faculty-web.at.northwestern.edu/economics/zheng/.