A New Payment Rule for Core-Selecting Package Auctions

Abstract:     
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.

Number of Pages in PDF File: 16

Keywords: multi-object auction, core, combinatorial auction, package auction, core-selecting auction, Vickrey auction, Vickrey, simultaneous ascending auction, robust design

JEL Classification: D44, C71

working papers series