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An Efficient and Incentive Compatible Dynamic Auction for Multiple Complements

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  • Ning Sun
  • Zaifu Yang

Abstract

This article proposes an efficient and incentive compatible dynamic auction for selling multiple complementary goods to finitely many bidders. The goods are traded in discrete quantities. The seller has a reserve price for every bundle of goods and determines which bundles to sell based on prevailing prices. The auctioneer announces a current price for every bundle of goods and a supply set of goods, every bidder subsequently responds with a set of goods demanded at these prices, and then the auctioneer adjusts prices. We prove that even when bidders can exercise their market power strategically, this dynamic auction always induces them to bid truthfully as price-takers, resulting in an efficient allocation, its supporting Walrasian equilibrium price for every bundle of goods, and a generalized Vickrey-Clarke-Groves payment for every bidder.

Suggested Citation

  • Ning Sun & Zaifu Yang, 2014. "An Efficient and Incentive Compatible Dynamic Auction for Multiple Complements," Discussion Papers 14/06, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:14/06
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    References listed on IDEAS

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    1. Bevia, Carmen & Quinzii, Martine & Silva, Jose A., 1999. "Buying several indivisible goods," Mathematical Social Sciences, Elsevier, vol. 37(1), pages 1-23, January.
    2. 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.
    3. Hurwicz, Leonid, 1973. "The Design of Mechanisms for Resource Allocation," American Economic Review, American Economic Association, vol. 63(2), pages 1-30, May.
    4. Aytek Erdil & Paul Klemperer, 2010. "A New Payment Rule for Core-Selecting Package Auctions," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 537-547, 04-05.
    5. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    6. 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.
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    8. Levin, Jonathan, 1997. "An Optimal Auction for Complements," Games and Economic Behavior, Elsevier, vol. 18(2), pages 176-192, February.
    9. Ning Sun & Zaifu Yang, 2008. "A Double-Track Auction for Substitutes and Complements," KIER Working Papers 656, Kyoto University, Institute of Economic Research.
    10. Gul, Faruk & Stacchetti, Ennio, 1999. "Walrasian Equilibrium with Gross Substitutes," Journal of Economic Theory, Elsevier, vol. 87(1), pages 95-124, July.
    11. Ning Sun & Zaifu Yang, 2006. "Equilibria and Indivisibilities: Gross Substitutes and Complements," Econometrica, Econometric Society, vol. 74(5), pages 1385-1402, September.
    12. Ning Sun & Zaifu Yang, 2009. "A Double-Track Adjustment Process for Discrete Markets With Substitutes and Complements," Econometrica, Econometric Society, vol. 77(3), pages 933-952, May.
    13. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
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    18. Michael H. Rothkopf, 2007. "Thirteen Reasons Why the Vickrey-Clarke-Groves Process Is Not Practical," Operations Research, INFORMS, vol. 55(2), pages 191-197, April.
    19. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
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    Citations

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    Cited by:

    1. repec:jmi:articl:jmi-v1i1a1 is not listed on IDEAS
    2. Tomoya Kazumura & Shigehiro Serizawa, 2016. "Efficiency and strategy-proofness in object assignment problems with multi-demand preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(3), pages 633-663, October.
    3. Gerard van der Laan & Zaifu Yang, 2016. "An ascending multi-item auction with financially constrained bidders," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 1(1), pages 109-149, December.
    4. repec:spr:jogath:v:46:y:2017:i:4:d:10.1007_s00182-017-0573-y is not listed on IDEAS
    5. repec:jmi:articl:jmi-v2i1a1 is not listed on IDEAS
    6. repec:bla:worlde:v:40:y:2017:i:8:p:1624-1645 is not listed on IDEAS
    7. repec:jmi:articl:jmi-v1i1a5 is not listed on IDEAS
    8. Ning Sun & Zaifu Yang, 2016. "A Theory of Marriage with Mutually Consented Divorces," Discussion Papers 16/14, Department of Economics, University of York.
    9. Satoru Fujishige & Zaifu Yang, 2015. "Decentralised Random Competitive Dynamic Market Processes," Discussion Papers 15/27, Department of Economics, University of York.

    More about this item

    Keywords

    Dynamic auction; complements; incomplete information; incentive; efficiency; ex post perfect equilibrium; indivisibility.;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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