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A New Payment Rule for Core-Selecting Package Auctions

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  • Aytek Erdil
  • Paul Klemperer

Abstract

We propose a new, easy-to-implement class of payment rules, "Reference Rules" to make core-selecting package auctions more robust. Small, almost-riskless, profitable deviations from "truthful bidding" are often easy for bidders to find under currently used payment rules. Reference Rules perform better than existing rules on our marginal-incentive-to-deviate criterion, and are as robust as existing rules to large deviations. Other considerations, including fairness and comprehensibility, also support the use of Reference Rules. (JEL: D44, C71) (c) 2010 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 8 (2010)
Issue (Month): 2-3 (04-05)
Pages: 537-547

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Handle: RePEc:tpr:jeurec:v:8:y:2010:i:2-3:p:537-547

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References

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  1. 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.
  2. Lawrence M. Ausubel & Peter Crampton & Paul Milgrom, 2004. "The Clock-Proxy Auction: A Practical Combinatorial Auction Design," Discussion Papers 03-034, Stanford Institute for Economic Policy Research.
  3. Peter Cramton, 2009. "Spectrum Auction Design," Papers of Peter Cramton 09sad, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  4. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
  5. 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.
  6. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer, vol. 36(3), pages 393-407, March.
  7. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
  8. Paul Milgrom, 2009. "Assignment Messages and Exchanges," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 95-113, August.
  9. Lawrence M. Ausubel & Paul Milgrom, 2002. "Ascending Auctions with Package Bidding," Working Papers 02004, Stanford University, Department of Economics.
  10. Peter Cramton & Yoav Shoham & Richard Steinberg, 2004. "Combinatorial Auctions," Papers of Peter Cramton 04mit, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
  11. Robert Day & Peter Cramton, 2008. "Quadratic Core-Selecting Payment Rules for Combinatorial Auctions," Papers of Peter Cramton 08qcspr, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
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Citations

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Cited by:
  1. Isa Hafalir & Hadi Yektas, . "Core Deviation Minimizing Auctions," GSIA Working Papers 2012-E23, Carnegie Mellon University, Tepper School of Business.
  2. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
  3. Sano, Ryuji, 2012. "Non-bidding equilibrium in an ascending core-selecting auction," Games and Economic Behavior, Elsevier, vol. 74(2), pages 637-650.
  4. 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.
  5. Laurent Lamy, 2009. "Ascending auctions: some impossibility results and their resolutions with final price discounts," PSE Working Papers halshs-00575076, HAL.
  6. Dolf Talman & Zaifu Yang, 2013. "An Efficient Multi-Item Dynamic Auction with Budget Constrained Bidders," Discussion Papers 13/31, Department of Economics, University of York.
  7. repec:hal:wpaper:halshs-00575076 is not listed on IDEAS
  8. Maarten Janssen & Vladimir Karamychev, 2013. "Gaming in Combinatorial Clock Auctions," Tinbergen Institute Discussion Papers 13-027/VII, Tinbergen Institute, revised 16 Dec 2013.
  9. Jacob K. Goeree & Yuanchuan Lien, 2009. "On the impossibility of core-selecting auctions," IEW - Working Papers 452, Institute for Empirical Research in Economics - University of Zurich.
  10. Hitoshi Matsushima, 2011. "Efficient Combinatorial Exchanges," CIRJE F-Series CIRJE-F-826, CIRJE, Faculty of Economics, University of Tokyo.
  11. Peter Cramton, 2013. "Spectrum Auction Design," Review of Industrial Organization, Springer, vol. 42(2), pages 161-190, March.
  12. Lawrence M. Ausubel & Oleg V. Baranov, 2014. "Market Design and the Evolution of the Combinatorial Clock Auction," American Economic Review, American Economic Association, vol. 104(5), pages 446-51, May.
  13. Akiyoshi Shioura & Zaifu Yang, 2013. "Equilibrium, Auction, Multiple Substitutes and Complements," Discussion Papers 13/17, Department of Economics, University of York.
  14. Lamy, Laurent, 2012. "On minimal ascending auctions with payment discounts," Games and Economic Behavior, Elsevier, vol. 75(2), pages 990-999.
  15. Thomas Greve & Michael G. Pollitt Author-X-Name-First Michael, . "Network Procurement Auctions," Cambridge Working Papers in Economics 1347, Faculty of Economics, University of Cambridge.
  16. Ott, Marion & Beck, Marissa, 2013. "Incentives for Overbidding in Minimum-Revenue Core-Selecting Auctions," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79946, Verein für Socialpolitik / German Economic Association.
  17. Martin Bichler & Pasha Shabalin & Jürgen Wolf, 2013. "Do core-selecting Combinatorial Clock Auctions always lead to high efficiency? An experimental analysis of spectrum auction designs," Experimental Economics, Springer, vol. 16(4), pages 511-545, December.
  18. Ning Sun & Zaifu Yang, 2014. "An Efficient and Incentive Compatible Dynamic Auction for Multiple Complements," Discussion Papers 14/06, Department of Economics, University of York.

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