IDEAS home Printed from https://ideas.repec.org/a/inm/orisre/v33y2022i4p1157-1173.html
   My bibliography  Save this article

Designing Core-Selecting Payment Rules: A Computational Search Approach

Author

Listed:
  • Benedikt Bünz

    (Stanford University, Stanford, California 94305)

  • Benjamin Lubin

    (Boston University, Boston, Massachusetts 02215)

  • Sven Seuken

    (University of Zurich, 8050 Zürich, Switzerland; ETH AI Center, 8092 Zürich, Switzerland)

Abstract

We study the design of core-selecting payment rules for combinatorial auctions, a challenging setting where no strategyproof rules exist. We show that the rule most commonly used in practice, the Quadratic rule, can be improved on in terms of efficiency, incentives, and revenue. We present a new computational search framework for finding good mechanisms, and we apply it toward a search for good core-selecting rules. Within our framework, we use an algorithmic Bayes–Nash equilibrium solver to evaluate 366 rules across 31 settings to identify rules that outperform the Quadratic rule. Our main finding is that our best-performing rules are large -style rules—that is, they provide bidders with large values with better incentives than does the Quadratic rule. Finally, we identify two particularly well-performing rules and suggest that they may be considered for practical implementation in place of the Quadratic rule.

Suggested Citation

  • Benedikt Bünz & Benjamin Lubin & Sven Seuken, 2022. "Designing Core-Selecting Payment Rules: A Computational Search Approach," Information Systems Research, INFORMS, vol. 33(4), pages 1157-1173, December.
    • Handle: RePEc:inm:orisre:v:33:y:2022:i:4:p:1157-1173
    DOI: 10.1287/isre.2022.1108
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/isre.2022.1108
    Download Restriction: no
    File URL: https://libkey.io/10.1287/isre.2022.1108?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Peter Cramton, 2013. "Spectrum Auction Design," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(2), pages 161-190, March.
    2. Aytek Erdil & Paul Klemperer, 2010. "A New Payment Rule for Core-Selecting Package Auctions," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 537-547, 04-05.
    3. 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.
    4. Ott, Marion & Beck, Marissa, 2013. "Incentives for Overbidding in Minimum-Revenue Core-Selecting Auctions," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79946, Verein für Socialpolitik / German Economic Association.
    5. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    6. Robert W. Day & S. Raghavan, 2007. "Fair Payments for Efficient Allocations in Public Sector Combinatorial Auctions," Management Science, INFORMS, vol. 53(9), pages 1389-1406, September.
    7. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 393-407, March.
    8. Paul Klemperer, 2010. "The Product-Mix Auction: A New Auction Design for Differentiated Goods," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 526-536, 04-05.
    9. Lawrence M. Ausubel & Oleg Baranov, 2017. "A Practical Guide to the Combinatorial Clock Auction," Economic Journal, Royal Economic Society, vol. 127(605), pages 334-350, October.
    10. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    11. , K. & ,, 2016. "On the impossibility of core-selecting auctions," Theoretical Economics, Econometric Society, vol. 11(1), January.
    12. Lawrence M. Ausubel & Oleg Baranov, 2017. "A Practical Guide to the Combinatorial Clock Auction," Economic Journal, Royal Economic Society, vol. 127(605), pages 334-350, October.
    13. Santiago Balseiro & Anthony Kim & Mohammad Mahdian & Vahab Mirrokni, 2021. "Budget-Management Strategies in Repeated Auctions," Operations Research, INFORMS, vol. 69(3), pages 859-876, May.
    14. Robert W. Day & Peter Cramton, 2012. "Quadratic Core-Selecting Payment Rules for Combinatorial Auctions," Operations Research, INFORMS, vol. 60(3), pages 588-603, June.
    15. Marszalec, Daniel, 2018. "Fear not the simplicity - An experimental analysis of auctions for complements," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 81-97.
    16. Peter Cramton & Yoav Shoham & Richard Steinberg (ed.), 2006. "Combinatorial Auctions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033429, December.
    17. Xiaotie Deng & Christos H. Papadimitriou, 1994. "On the Complexity of Cooperative Solution Concepts," Mathematics of Operations Research, INFORMS, vol. 19(2), pages 257-266, May.
    18. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    19. Paul Milgrom, 2007. "Package Auctions and Exchanges," Econometrica, Econometric Society, vol. 75(4), pages 935-965, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lawrence M. Ausubel & Oleg Baranov, 2020. "Core-selecting auctions with incomplete information," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(1), pages 251-273, March.
    2. Ryuji Sano, 2018. "An equilibrium analysis of a core-selecting package auction with reserve prices," Review of Economic Design, Springer;Society for Economic Design, vol. 22(3), pages 101-122, December.
    3. Mochon, A. & Saez, Y. & Gomez-Barroso, J.L. & Isasi, P., 2012. "Exploring pricing rules in combinatorial sealed-bid auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 462-478.
    4. Ott, Marion, 2019. "Simple Bayesian and Ex-Post Equilibria in Combinatorial Auctions," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203616, Verein für Socialpolitik / German Economic Association.
    5. Committee, Nobel Prize, 2020. "Improvements to auction theory and inventions of new auction formats," Nobel Prize in Economics documents 2020-2, Nobel Prize Committee.
    6. Kazumori, Eiichiro & Belch, Yaakov, 2019. "t-Tree: The Tokyo toolbox for large-scale combinatorial auction experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    7. Isa Hafalir & Hadi Yektaş, 2015. "Core deviation minimizing auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(2), pages 367-376, May.
    8. Blumrosen, Liad & Solan, Eilon, 2023. "Selling spectrum in the presence of shared networks: The case of the Israeli 5G auction," Telecommunications Policy, Elsevier, vol. 47(2).
    9. Lamprirni Zarpala & Dimitris Voliotis, 2022. "A core-selecting auction for portfolio's packages," Papers 2206.11516, arXiv.org, revised Feb 2024.
    10. Vohra, Rakesh V., 2015. "Combinatorial Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    11. Kemal Guler & Martin Bichler & Ioannis Petrakis, 2016. "Ascending Combinatorial Auctions with Risk Averse Bidders," Group Decision and Negotiation, Springer, vol. 25(3), pages 609-639, May.
    12. Sano, Ryuji, 2013. "Vickrey-reserve auctions and an equilibrium equivalence," Mathematical Social Sciences, Elsevier, vol. 65(2), pages 112-117.
    13. Francisco Robles, 2016. "An implementation of the Vickrey outcome with gross-substitutes," UB School of Economics Working Papers 2016/353, University of Barcelona School of Economics.
    14. Ryuji Sano, 2015. "Improving Efficiency Using Reserve Prices: An Equilibrium Analysis of Core-Selecting Auctions," KIER Working Papers 926, Kyoto University, Institute of Economic Research.
    15. Paul Karaenke & Martin Bichler & Stefan Minner, 2019. "Coordination Is Hard: Electronic Auction Mechanisms for Increased Efficiency in Transportation Logistics," Management Science, INFORMS, vol. 65(12), pages 5884-5900, December.
    16. Michael O. Ball & Alexander S. Estes & Mark Hansen & Yulin Liu, 2020. "Quantity-Contingent Auctions and Allocation of Airport Slots," Transportation Science, INFORMS, vol. 54(4), pages 858-881, July.
    17. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    18. Mochon, Asuncion & Saez, Yago, 2017. "A review of radio spectrum combinatorial clock auctions," Telecommunications Policy, Elsevier, vol. 41(5), pages 303-324.
    19. Aytek Erdil & Paul Klemperer, 2010. "A New Payment Rule for Core-Selecting Package Auctions," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 537-547, 04-05.
    20. Alexander Teytelboym & Shengwu Li & Scott Duke Kominers & Mohammad Akbarpour & Piotr Dworczak, 2021. "Discovering Auctions: Contributions of Paul Milgrom and Robert Wilson," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 709-750, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orisre:v:33:y:2022:i:4:p:1157-1173. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.