Simulating combinatorial auctions with dominance requirement and loll bids through automated agents

When complementarity or substitutability relations exist among the items for auction, the use of combinatorial bidding (i.e. permitting players to bid on bundles of items) enhances the seller's revenue and ex-post market efficiency. We present a new first-price multi-round combinatorial format, where bids are subject to a stronger requirement than validity, and a new tool is applied, which in a sense generalizes the concept of waiver. The auction format is simulated through automated agents, assuming a model of bidders' beliefs about their opponents. We perform statistical analyses on simulation results, obtaining useful hints for the design of ascending combinatorial formats. (c) 2006 Elsevier B.V. All rights reserved.