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Applicant Auctions for Internet Top-Level Domains: Resolving Conflicts Efficiently (2013)
BibTeX
@MISC{Cramton13applicantauctions,
author = {Peter Cramton and Ulrich Gall},
title = {Applicant Auctions for Internet Top-Level Domains: Resolving Conflicts Efficiently},
year = {2013}
}
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Abstract
The prospect of using auctions to resolve conflicts among parties competing for the same top-level internet domains is described. In the auctions investigated, the winner’s payment is divided among the losers. For first-price and second-price sealed-bid auctions, we characterize equilibrium bidding strategies and provide examples, assuming bidders ’ valuations are distributed independently and are either symmetrically or asymmetrically distributed. The qualitative properties of equilibria reveal novel features; for example, in a second-price auction a bidder might bid more than her valuation in order to drive up the winner’s payment. Even so, examples indicate that in symmetric cases a bidder’s expected profit is the same in the two auction formats. We then test in the experimental lab two auction formats that extent the setting from a single domain to the actual setting with many domains. The first format is a sequential first-price sealed-bid auction; the second format is a simultaneous ascending clock auction. The framing and subjects were chosen to closely match the actual setting. Subjects were PhD students at the University of Maryland with training in game theory and auction theory. Each subject played the role of an actual company (e.g., Google) and bid for domains (e.g.,.book) consistent with the company’s applications. Subjects were given instructions explaining the auction and the equilibrium theory for the single-item case in relevant examples. Both formats achieved auction efficiencies of 98 % in the lab. This high level of efficiency is especially remarkable in the case with asymmetric distributions—the format performed better than the simple single-item equilibrium despite the presence of budget constraints in the lab. This experiment together with previous results on the robustness of ascending auctions in general and simultaneous ascending clock auctions in particular suggest that the simultaneous ascending clock auction will perform best in this setting. 1
Keyphrases
clock auction applicant auction internet top-level domain winner payment actual setting auction format many domain second format budget constraint single domain auction efficiency first format previous result novel feature equilibrium theory qualitative property bidder valuation actual company symmetric case top-level internet domain particular suggest auction theory single-item case experimental lab phd student equilibrium bidding strategy company application high level second-price auction sequential first-price sealed-bid auction asymmetric distribution relevant example second-price sealed-bid auction game theory simple single-item equilibrium
