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Contingent Auctions with Allocative Externalities: Vickrey vs. the Ausubel-Milgrom Proxy Auction

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  • Laurent Lamy

    (CREST-INSEE)

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    Abstract

    We introduce contingent auction mechanisms, which is a superset of combinatorial auctions, and where bidders submit bids on packages that are contingent on the whole final assignment. Without externalities, the Vickrey and the Ausubel-Milgrom Proxy Auction are both robust if items are perceived as substitutes. Such an equivalence between those formats may not hold with externalities and the analog of the substitute condition is a complex unexplored issue. We analyse those issues in the Negative Group-Dependent Externalities framework, a general structure with allocative externalities between joint-purchasers.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 427.

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    Date of creation: 2007
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    Handle: RePEc:red:sed007:427

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    1. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Mishra, Debasis & Parkes, David C., 2007. "Ascending price Vickrey auctions for general valuations," Journal of Economic Theory, Elsevier, vol. 132(1), pages 335-366, January.
    3. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
    4. Vasiliki Skreta & Nicolas Figueroa, 2008. "The Role of Outside Options in Auction Design," Working Papers 08-12, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Milgrom, Paul, 1998. "Putting auction theory to work : the simultaneous ascending auction," Policy Research Working Paper Series 1986, The World Bank.
    6. Philippe Jehiel & Moritz Meyer-ter-Vehn & Benny Moldovanu & William R. Zame, 2005. "The Limits of Ex-Post Implementation," Levine's Bibliography 666156000000000548, UCLA Department of Economics.
    7. Sven de Vries & James Schummer, 2005. "On Ascending Vickrey Auctions for Heterogeneous Objects," 2005 Meeting Papers 389, Society for Economic Dynamics.
    8. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
    9. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, vol. 85(2), pages 258-293, April.
    10. Laurent Lamy, 2007. "The Ausubel-Milgrom Proxy Auction with Final Discounts," Working Papers 2007-25, Centre de Recherche en Economie et Statistique.
    11. John William Hatfield & Paul R. Milgrom, 2005. "Matching with Contracts," American Economic Review, American Economic Association, vol. 95(4), pages 913-935, September.
    12. 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.
    13. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, 05.
    14. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521551847, October.
    15. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February.
    16. Bikhchandani, Sushil & Ostroy, Joseph M., 2006. "Ascending price Vickrey auctions," Games and Economic Behavior, Elsevier, vol. 55(2), pages 215-241, May.
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