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.

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

JEL Classification: D44, C71