The Quadratic Core-Selecting Payment Rule for Combinatorial Auctions

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The Quadratic Core-Selecting Payment Rule for Combinatorial Auctions

Author Info

Robert Day ()
Peter Cramton () (Economics Department, University of Maryland)

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Peter Cramton

Abstract

We report on the use of a quadratic programming technique in recent and upcoming spectrum auctions in Europe, and proposed for use in the FAA’s landing-slot auctions in the United States. Specifically, we compute a unique point “in the core” that minimizes the sum of squared deviations from the Vickrey-Clarke-Groves payments. Analyzing the Karush-Kuhn-Tucker conditions, we demonstrate that the resulting payments can be decomposed into a series of economically meaningful and equitable penalties, adding to the perceived “fairness” of this payment rule. Further, we discuss the many benefits of this combinatorial auction paradigm.

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Publisher Info
Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 08qcspr.

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Length: 22 pages
Date of creation: 2008
Date of revision: 2008
Publication status: Published in Working Paper, University of Maryland, September 2008
Handle: RePEc:pcc:pccumd:08qcspr

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

For technical questions regarding this item, or to correct its listing, contact: (Peter Cramton).

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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repec:bep:theadv:v:1:y:2002:i:1:p:1019-1019 is not listed on IDEAS
Other versions:
- Lawrence M. Ausubel & Paul Milgrom, 2002. "Ascending Auctions with Package Bidding," Working Papers 02004, Stanford University, Department of Economics. [Downloadable!]
Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer, vol. 36(3), pages 393-407, March. [Downloadable!] (restricted)
Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)

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