Adaptive bidding strategies

The Smith Institute created a bid reconstruction tool for Vodafone Group R&D as part of its preparation for the Indian 800-900-1800-2100MHz multiband spectrum auction.

The problem

In February 2015 the Indian Department of Telecommunications conducted a multiband spectrum auction across the 800-900-1800-2100MHz frequencies, using a Simultaneous Multi-Round Ascending Auction (SMRA) design.

Combining information released during the auction with an understanding of the objectives of the different bidders can allow inferences to be drawn about the bids submitted by individual bidders. Drawing these inferences correctly allows adjustment of one's own bidding strategy, with the aim of achieving a better auction outcome.

Vodafone India intended to participate in the Indian spectrum auction. Vodafone Group R&D therefore had a keen interest on the auction and commissioned the Smith Institute to create a bid reconstruction tool. This tool would allow Vodafone to build up a picture of bidder activity as the auction progresses, and in turn it would guide Vodafone's own bidding behaviour.

The solution

A bid reconstruction tool allows an analyst to see whether a proposed reconstruction is consistent with information provided by the auctioneer and information about the individual bidders, gathered by knowledge about competition and market evaluations. In the Indian auction, bidding was broken down into geographical regions, known as “circles”.

Vodafone wished to have a tool capable of:

  • generating a list of possible reconstructions for each circle;
  • ordering these reconstructions by plausibility; and
  • combining reconstructions across the different circles.

As the bid reconstruction tool would be used by analysts during the live auction, the run-time needed to be practical, and in addition it needed to have scope to allow for analyst input into the reconstructions proposed.

Our approach to this project involved creating a proof-of-concept tool that demonstrates the tractability of the problem through reference to data from a previous Indian spectrum auction. The tool was written in Matlab and provided as an executable file to Vodafone Group R&D.

The tool needed to be developed rapidly and we worked in close collaboration with Vodafone for 6 weeks to create a tool that reflected the complexity of the auction design and was straightforward to use by analysts. A live demonstration of the use of the tool was provided.

The benefit

The Indian multiband auction was critical to incumbent operators such as Vodafone India, in particular in the 900MHz band.

Vodafone India successfully secured spectrum in all six of its existing 900MHz.

Our bid reconstruction tool offered Vodafone Group R&D a useful aid to think about the hidden challenges in preparation for the award.

This was a large-scale problem, with unavoidable uncertainty in its definition. It would have been quite easy for the Smith Institute guys to object – how can we solve an optimisation problem if you can’t define it properly? – but they took it in their stride, seeing that the best approach would be to build a tool that would allow analysts to adapt the problem statement as they went along. I would certainly consider the Smith Institute for similar challenges in future.

Steve BabbageVodafone Distinguished Engineer, Security Research Manager and Group Chief Cryptographer at Vodafone Group R&D
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