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Pareto efficient combinatorial auctions: dichotomous preferences without quasilinearity

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  • Komal Malik

    (Indian Statistical Institute, Delhi)

  • Debasis Mishra

    (Indian Statistical Institute, Delhi)

Abstract

We consider a combinatorial auction model where preferences of agents over bundles of objects and transfers need not be quasilinear. We show the salience of dichotomous preferences in this model: an agent with dichotomous preference partitions the set of bundles of objects as acceptable and unacceptable, and at the same transfer level, she is indifferent between bundles in each class but strictly prefers acceptable to unacceptable bundles. We show that there is no Pareto efficient, dominant strategy incentive compatible (DSIC), individually rational (IR) mechanism satisfying no subsidy if the domain of preferences includes all dichotomous preferences. However, a generalization of the VCG mechanism is Pareto efficient, DSIC, IR and satisfies no subsidy if the domain of preferences is the set of all positive income effect dichotomous preferences. We show tightness of this result: adding a non-dichotomous preference (satisfying some natural properties) to such a domain of preferences brings back the impossibility result.

Suggested Citation

  • Komal Malik & Debasis Mishra, 2018. "Pareto efficient combinatorial auctions: dichotomous preferences without quasilinearity," Discussion Papers 18-06, Indian Statistical Institute, Delhi.
    • Handle: RePEc:alo:isipdp:18-06
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    More about this item

    Keywords

    combinatorial auctions; non-quasilinear preferences; dichotomous preferences; single-minded bidders;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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