Substitute goods, auctions, and equilibrium
This paper identifies two notions of substitutes for auction and equilibrium analysis. Weak substitutes, the usual price-theory notion, guarantees monotonicity of Tatonnement processes and convergence of clock auctions to a pseudo-equilibrium, but only strong substitutes, which treats each unit traded as a distinct good with its own price, guarantees that every pseudo-equilibrium is a Walrasian equilibrium, that the Vickrey outcome is in the core, and that the "law of aggregate demand" is satisfied. When goods are divisible, weak substitutes along with concavity guarantees all of the above properties, except for the law of aggregate demand.
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- Milgrom, Paul, 1994. "Comparing Optima: Do Simplifying Assumptions Affect Conclusions?," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 607-15, June.
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- Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
- Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
- Lawrence M. Ausubel & Paul Milgrom, 2002.
"Ascending Auctions with Package Bidding,"
02004, Stanford University, Department of Economics.
- Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
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