Quantity-Contingent Auctions and Allocation of Airport Slots

In this paper, we define and investigate quantity-contingent auctions. Such auctions can be used when there exist multiple units of a single product and the value of a set of units depends on the total quantity sold. For example, a road network or airport will become congested as the number of users increase so that a permit for use becomes more valuable as the total number allocated decreases. A quantity-contingent auction determines both the number of items sold and an allocation of items to bidders. Because such auctions could be used by bidders to gain excessive market power, we impose constraints limiting market power. We focus on auctions that allocate airport arrival and departure slots. We propose a continuous model and an integer programming model for the associated winner determination problem. Using these models, we perform computational experiments that lend insights into the properties of the quantity-contingent auction.