Simultaneous Auctions with Synergies

Motivated by recent auctions of licenses for the radio-frequency spectrum, we consider situations where multiple objects are auctioned simultaneously by means of a second-price, sealed-bid auction. For some buyers, called global bidders, the value of multiple objects exceeds the sum of objects' values separately. Others, called local bidders, are interested in only one object. In a simple independent private values setting, we (a) characterize an equilibrium that is symmetric among the global bidders; (b) show that the addition of bidders often leads to less aggressive bidding; and (c) compare the revenues obtained from the simultaneous auction to those from its sequential counterpart.