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Combinatorial Auctioneering Christoph Brunner Jacob K Goeree Charles A Holt and John O Ledyard July 26 2006 Abstract The simultaneous multi round SMR auction introduced by the FCC in 1994 has been successfully applied in the sales of high valued market licenses around the world The FCC now contemplates setting a new standard that incorporates the possibility of package or combinatorial bids This paper provides the first comprehensive laboratory test of several combinatorial auction formats that have been proposed in the recent literature We find stark differences in terms of efficiencies and revenues sometimes caused by seemingly minor design details In general however the interest of policy makers in combinatorial auctions is justified by the laboratory data there are simple package bidding formats that yield improved performance especially in terms of seller revenue We perform stress tests by considering environments where collusion is sustained in equilibrium in any of the single stage multi round formats We introduce the two stage Anglo Dutch combinatorial auction consisting of a multi round clock stage followed by a single round of sealed bids and find it effectively breaks collusion Brunner Goeree and Ledyard Division of the Humanities and Social Sciences California Institute of Technology Mail code 228 77 Pasadena CA 91125 USA Holt Department of Economics PO Box 400182 University of Virginia Charlottesville VA 22904 4182 We acknowledge partial financial support from the Federal Communications Commission FCC contract 05000012 the Alfred P Sloan Foundation the Bankard Fund the National Science Foundation SBR 0094800 and the Dutch National Science Foundation VICI 453 03 606 The conclusions and recommendations of this paper are those of the authors alone and should not be attributed to the funding organizations We would like to thank Martha Stancill Bill Sharkey and Mark Bykowski for useful discussions We are grateful to Raj Advani Charlie Hornberger Jou

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