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An Efficient Dynamic Auction for Heterogeneous Commodities

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  • Lawrence M. Ausubel

Abstract

This article proposes a new dynamic design for auctioning multiple heterogeneous commodities. An auctioneer wishes to allocate K types of commodities among n bidders. The auctioneer announces a vector of current prices, bidders report quantities demanded at these prices, and the auctioneer adjusts the prices. Units are credited to bidders at the current prices as their opponents' demands decline, and the process continues until every commodity market clears. Bidders, rather than being assumed to behave as price-takers, are permitted to strategically exercise their market power. Nevertheless, the proposed auction yields Walrasian equilibrium prices and, as from a Vickrey-Clarke-Groves mechanism, an efficient allocation. (JEL D44)

Suggested Citation

  • Lawrence M. Ausubel, 2006. "An Efficient Dynamic Auction for Heterogeneous Commodities," American Economic Review, American Economic Association, vol. 96(3), pages 602-629, June.
  • Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:602-629
    Note: DOI: 10.1257/aer.96.3.602
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    References listed on IDEAS

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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