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Ascending Auctions with Package Bidding

Author

Listed:
  • Ausubel Lawrence M

    (University of Maryland, ausubel@econ.umd.edu)

  • Milgrom Paul R

    (Stanford University, paul@milgrom.net)

Abstract

A family of ascending package auction models is introduced in which bidders may determine their own packages on which to bid. In the proxy auction (revelation game) versions, the outcome is a point in the core of the exchange economy for the reported preferences. When payoffs are linear in money and goods are substitutes, sincere reporting constitutes a Nash equilibrium and the outcome coincides with the Vickrey auction outcome. Even when goods are not substitutes, ascending proxy auction equilibria lie in the core with respect to the true preferences. Compared to the Vickrey auction, the proxy auctions generate higher equilibrium revenues, are less vulnerable to shill bidding and collusion, can handle budget constraints much more robustly, and may provide better ex ante investment incentives.

Suggested Citation

  • Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    • Handle: RePEc:bpj:bejtec:v:frontiers.1:y:2002:i:1:n:1
    DOI: 10.2202/1534-5963.1019
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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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