Combinatorial Auction

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Definition: Combinatorial Auction

This is a different kind of auction where bidders place bids on “packages”, i.e. a combination of items instead of single items. The goods are bundled and put up for auction. This was started in real estate sector and now is also used in allocation of telecom spectrum, 3G, flight routes, departure and arrival slots, truckload transportation etc.

Other than optimization in terms of price, i.e. find the optimum price for allocation; it also includes operational issues. I.e. how many items should be aggregated for optimum operations, maximizing efficiency and minimizing price. The economic efficiencies are also optimized because of combinatorial auctions.


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