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The Product-Mix Auction: A New Auction Design for Differentiated Goods

  • Paul Klemperer

I describe a new static (sealed-bid) auction for differentiated goods--the "Product-Mix Auction." Bidders bid on multiple assets simultaneously, and bid-takers choose supply functions across assets. The auction yields greater efficiency, revenue, information, and trade than running multiple separate auctions. It is also often simpler to use and understand, and less vulnerable to collusion, than a simultaneous multiple round auction. I designed it after the 2007 Northern Rock bank run to help the Bank of England fight the credit crunch; in 2008 the U.S. Treasury planned using a related design to buy "toxic assets"; it may be used to purchase electricity. (JEL: D44, E58) (c) 2010 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 8 (2010)
Issue (Month): 2-3 (04-05)
Pages: 526-536

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Handle: RePEc:tpr:jeurec:v:8:y:2010:i:2-3:p:526-536
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  1. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
  2. Lawrence M. Ausubel & Peter Cramton & Emel Filiz-Ozbay & Nathaniel Higgins & Erkut Ozbay & Andrew Stocking, 2009. "Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction," Papers of Peter Cramton 09cvawln, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  3. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  4. repec:cup:cbooks:9780521536721 is not listed on IDEAS
  5. repec:cup:cbooks:9780521551847 is not listed on IDEAS
  6. Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, vol. 49(2), pages 437-50, March.
  7. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November.
  8. Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
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