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An Efficient Dynamic Auction for Heterogeneous Commodities

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  • Lawrence M. Ausubel
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    Abstract

    This article proposes a new dynamic design for auctioning multiple heterogeneous commodities. An auctioneer wishes to allocate K types of commodities among n bidders. The auctioneer announces a vector of current prices, bidders report quantities demanded at these prices, and the auctioneer adjusts the prices. Units are credited to bidders at the current prices as their opponents' demands decline, and the process continues until every commodity market clears. Bidders, rather than being assumed to behave as price-takers, are permitted to strategically exercise their market power. Nevertheless, the proposed auction yields Walrasian equilibrium prices and, as from a Vickrey-Clarke-Groves mechanism, an efficient allocation. (JEL D44)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.3.602
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 96 (2006)
    Issue (Month): 3 (June)
    Pages: 602-629

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    Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:602-629

    Note: DOI: 10.1257/aer.96.3.602
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    References

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    1. Motty Perry & Philip J. Reny, 2005. "An Efficient Multi-Unit Ascending Auction," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 567-592.
    2. Lawrence M. Ausubel & Peter Cramton, 2004. "Auctioning Many Divisible Goods," Papers of Peter Cramton 04jeea, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
    3. Motty Perry & Philip J. Reny, 2002. "An Efficient Auction," Econometrica, Econometric Society, vol. 70(3), pages 1199-1212, May.
    4. P. Dasgupta & Eric Maskin, 1998. "Efficient Auctions," Harvard Institute of Economic Research Working Papers 1857, Harvard - Institute of Economic Research.
    5. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
    6. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-72, August.
    7. Jehiel, Phillipe & Moldovanu, Benny, 1998. "Efficient Design with Interdependent Valuations," Sonderforschungsbereich 504 Publications 98-22, Sonderforschungsbereich 504, Universit├Ąt Mannheim & Sonderforschungsbereich 504, University of Mannheim.
    8. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
    9. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
    10. Krishna, Vijay & Maenner, Eliot, 2001. "Convex Potentials with an Application to Mechanism Design," Econometrica, Econometric Society, vol. 69(4), pages 1113-19, July.
    11. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
    12. Bikhchandani, Sushil & Ostroy, Joseph M., 2006. "Ascending price Vickrey auctions," Games and Economic Behavior, Elsevier, vol. 55(2), pages 215-241, May.
    13. Herbert E. Scarf, 1959. "Some Examples of Global Instability of the Competitive Equilibrium," Cowles Foundation Discussion Papers 79, Cowles Foundation for Research in Economics, Yale University.
    14. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    15. Lawrence Ausubel & Peter Cramton, 2004. "Vickrey auctions with reserve pricing," Economic Theory, Springer, vol. 23(3), pages 493-505, March.
    16. Gul, Faruk & Stacchetti, Ennio, 2000. "The English Auction with Differentiated Commodities," Journal of Economic Theory, Elsevier, vol. 92(1), pages 66-95, May.
    17. Bikhchandani, Sushil & Ostroy, Joseph M., 2002. "The Package Assignment Model," Journal of Economic Theory, Elsevier, vol. 107(2), pages 377-406, December.
    18. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
    19. Jeffrey S. Banks & John O. Ledyard & David P. Porter, 1989. "Allocating Uncertain and Unresponsive Resources: An Experimental Approach," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 1-25, Spring.
    20. Bikhchandani, Sushil & Mamer, John W., 1997. "Competitive Equilibrium in an Exchange Economy with Indivisibilities," Journal of Economic Theory, Elsevier, vol. 74(2), pages 385-413, June.
    21. Gul, Faruk & Stacchetti, Ennio, 1999. "Walrasian Equilibrium with Gross Substitutes," Journal of Economic Theory, Elsevier, vol. 87(1), pages 95-124, July.
    22. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November.
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    Citations

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    Cited by:
    1. Hitoshi Matsushima, 2011. "Price-Based Combinatorial Auction: Connectedness and Representative Valuations," CARF F-Series CARF-F-261, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    2. Peter Cramton, 2009. "Spectrum Auction Design," Papers of Peter Cramton 09sad, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
    3. Hitoshi Matsushima, 2011. "Efficient Combinatorial Exchanges," CARF F-Series CARF-F-258, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    4. Hitoshi Matsushima, 2010. "Auctioneer's Discretion in Combinatorial Auctions," CARF F-Series CARF-F-293, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Sep 2012.
    5. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    6. Andersson , Tommy & Yang , Zaifu & Zhang , Dongmo, 2014. "How to Efficiently Allocate Houses under Price Controls?," Working Papers 2014:24, Lund University, Department of Economics.

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