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A New Payment Rule for Core-Selecting Package Auctions

  • Erdil, Aytek
  • Klemperer, Paul

We propose a new, easy-to-implement, class of payment rules, "Reference Rules," to make core-selecting package auctions more robust. Small, almost riskless, profitable deviations from "truthful bidding" are often easy for bidders to find under currently-used payment rules. Reference Rules perform better than existing rules on our marginal-incentive-to-deviate criterion, and are as robust as existing rules to large deviations. Other considerations, including fairness and comprehensibility, also support the use of Reference Rules.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7487.

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Date of creation: Oct 2009
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Handle: RePEc:cpr:ceprdp:7487
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  1. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer, vol. 36(3), pages 393-407, March.
  2. Lawrence M. Ausubel & Peter Crampton & Paul Milgrom, 2004. "The Clock-Proxy Auction: A Practical Combinatorial Auction Design," Discussion Papers 03-034, Stanford Institute for Economic Policy Research.
  3. Peter Cramton, 2009. "Spectrum Auction Design," Papers of Peter Cramton 09sad, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  4. Lawrence M. Ausubel & Paul Milgrom, 2002. "Ascending Auctions with Package Bidding," Working Papers 02004, Stanford University, Department of Economics.
  5. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2005. "Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords," NBER Working Papers 11765, National Bureau of Economic Research, Inc.
  6. Paul Milgrom, 2009. "Assignment Messages and Exchanges," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 95-113, August.
  7. Robert W. Day & S. Raghavan, 2007. "Fair Payments for Efficient Allocations in Public Sector Combinatorial Auctions," Management Science, INFORMS, vol. 53(9), pages 1389-1406, September.
  8. Robert Day & Peter Cramton, 2008. "Quadratic Core-Selecting Payment Rules for Combinatorial Auctions," Papers of Peter Cramton 08qcspr, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  9. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
  10. Paul Klemperer, 2010. "The Product-Mix Auction: A New Auction Design for Differentiated Goods," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 526-536, 04-05.
  11. Peter Cramton & Yoav Shoham & Richard Steinberg, 2004. "Combinatorial Auctions," Papers of Peter Cramton 04mit, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
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