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An Efficient Double-Track Auction for Substitutes and Complements

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  • Ning Sun
  • Zaifu Yang
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    Abstract

    We propose a dynamic auction mechanism for efficiently allocating multiple heterogeneous indivisible items. These goods can be split into two distinct sets so that items in each of the two sets are substitutes but are complementary to items in the other. The seller has a reserve value for each bundle of goods. In each round of the auction, the auctioneer announces the current prices for all items, bidders respond by reporting their demands at these prices, and then the auctioneer adjusts simultaneously the prices of items in one set upwards but those of items in the other downwards. We prove that despite the fact that bidders are not assumed to be price-takers and thus can strategically exercise their market power, this dynamic auction always yields an efficient outcome and induces the bidders to bid truthfully and at the same time protects them from fully exposing their private values.

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    File URL: http://www.york.ac.uk/media/economics/documents/discussionpapers/2012/1222.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of York in its series Discussion Papers with number 12/22.

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    Date of creation: Aug 2012
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    Handle: RePEc:yor:yorken:12/22

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    Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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    Web page: http://www.york.ac.uk/economics/
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    Related research

    Keywords: Dynamic auction; gross substitutes and complements; incentives; efficiency; indivisibility;

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    1. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
      [Auctions: Theory and Practice]
      ," Introductory Chapters, Princeton University Press.
    2. Ning Sun & Zaifu Yang, 2006. "Equilibria and Indivisibilities: Gross Substitutes and Complements," Econometrica, Econometric Society, vol. 74(5), pages 1385-1402, 09.
    3. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
    4. Michael Ostrovsky, 2008. "Stability in Supply Chain Networks," American Economic Review, American Economic Association, vol. 98(3), pages 897-923, June.
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