HARVARD CS -700 - A combinatorial auction mechanism

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Article Contentsp. 402p. 403p. 404p. 405p. 406p. 407p. 408p. 409p. 410p. 411p. 412p. 413p. 414p. 415p. 416p. 417Issue Table of ContentsThe Bell Journal of Economics, Vol. 13, No. 2, Autumn, 1982Front MatterLearning Effects and the Commercialization of New Energy Technologies: The Case of Nuclear Power [pp. 297 - 310]Authority, Control, and the Distribution of Earnings [pp. 311 - 323]Moral Hazard in Teams [pp. 324 - 340]The Roles of Public and Private Storage in Managing Oil Import Disruptions [pp. 341 - 353]Optimal Regulation of Research and Development under Imperfect Information [pp. 354 - 368]Risk Sharing and the Theory of the Firm [pp. 369 - 378]The Effect of Liquor Taxes on Heavy Drinking [pp. 379 - 390]The Social Costs of Monopoly and Regulation: A Game-Theoretic Analysis [pp. 391 - 401]A Combinatorial Auction Mechanism for Airport Time Slot Allocation [pp. 402 - 417]Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition [pp. 418 - 438]The Long-Run Structure of Transportation and Gasoline Demand [pp. 439 - 454]Linear Tariffs with Quality Discrimination [pp. 455 - 471]Competition, Profit Incentives, and Technical Efficiency in the Provision of Nuclear Medicine Services [pp. 472 - 482]Optimal Product Quality under Asymmetric Information and Moral Hazard [pp. 483 - 492]Does the Geographical Distribution of Physicians Reflect Market Failure? [pp. 493 - 505]Consistent Regulatory Policy under Uncertainty [pp. 506 - 521]Short ArticlesWelfare Implications of Fully Distributed Cost Pricing Applied to Partially Regulated Firms [pp. 525 - 533]Cake Slicing and Revealed Government Preference [pp. 534 - 540]On Share Contracts and Screening [pp. 541 - 547]Productivity Growth, Environmental Regulations and the Composition of R & D [pp. 548 - 554]Risk-Spreading Properties of Common Tax and Contract Instruments [pp. 555 - 560]Short ArticlesResource Information Policy and Federal Resource Leasing [pp. 561 - 568]Contingent Pricing and Economic Regulation [pp. 569 - 574]Location and Spatial Pricing Theory with Nonconvex Transportation Cost Schedules [pp. 575 - 582]Testing for Market Preemption using Sequential Location Data: Note [pp. 583 - 584]Testing for Market Preemption using Sequential Location Data: Reply [pp. 585 - 586]Book ReviewBreyer's Regulation and Its Reform [pp. 589 - 591]Back Matter [pp. 523 - 588]The RAND CorporationA Combinatorial Auction Mechanism for Airport Time Slot AllocationAuthor(s): S. J. Rassenti, V. L. Smith, R. L. BulfinSource: The Bell Journal of Economics, Vol. 13, No. 2 (Autumn, 1982), pp. 402-417Published by: The RAND CorporationStable URL: http://www.jstor.org/stable/3003463Accessed: 18/09/2008 18:54Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available athttp://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unlessyou have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and youmay use content in the JSTOR archive only for your personal, non-commercial use.Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained athttp://www.jstor.org/action/showPublisher?publisherCode=rand.Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission.JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with thescholarly community to preserve their work and the materials they rely upon, and to build a common research platform thatpromotes the discovery and use of these resources. For more information about JSTOR, please contact [email protected] RAND Corporation is collaborating with JSTOR to digitize, preserve and extend access to The BellJournal of Economics.http://www.jstor.orgA combinatorial auction mechanism for airport time slot allocation S.J. Rassenti* V.L. Smith** and R.L. Bulfin*** A sealed-bid comnbinatorial auction is developedfor the allocation of aii-port time slots to competing airlines. Thlis auction procedure permits airlines to submit various contingency bids for flight-compatible combinations of individual airport landing or take-off slots. An algorithm for solving the resulting set-packing problem yields an allocation of slots to packages that maximizes the system surplus as revealed by the set of package bids sub- mitted. The algorithm determines individual (slot) resource prices whichl are used to price packages to the winning bidders at levels guaranteed to be no greater (and normally smaller) than the amounts bid. Laboratory experiments with cash motivated subjects are used to study the efficiency and demand revelation properties of the combinatorial auction in comparison with a proposed independent slot primary auction. 1. The problem of allocating airport slots * In 1968 the FAA adopted a high density rule for the allocation of scarce landing and take-off slots at four major airports (La Guardia, Washington National, Kennedy Inter- national, and O'Hare International). This rule establishes slot quotas for the control of airspace congestion at these airports. Airport runway slots, regulated by these quotas, have a distinguishing feature which any proposed allocation procedure must accommodate: an airline's demand for a take- off slot at a flight originating airport is not independent of its demand for a landing slot at the flight destination airport. Indeed, a given flight may take off and land in a sequence of several connected demand interdependent legs. For economic efficiency it is desirable to develop an airport slot allocation procedure that allocates individual slots to those airline flights for which the demand (willingness to pay) is greatest. Grether, Isaac, and Plott (hereafter, GIP) (1979, 1981) have proposed a practical market procedure for achieving this goal. Their procedure is based upon the growing body of experimental evidence on the performance of (1) the competitive (uniform-price) sealed-bid auction and (2) the oral double auction such as is used on the organized stock and commodity exchanges. Under their proposal an independent primary market for slots at each airport would be organized as a sealed-bid competitive auction at timely intervals. Since the primary market


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