A New Payment Rule for Core-Selecting Package Auctions

16 Pages Posted: 25 Sep 2009 Last revised: 6 Oct 2010

See all articles by Aytek Erdil

Aytek Erdil

University of Cambridge

Paul Klemperer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: November 6, 2009

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

Suggested Citation

Erdil, Aytek and Klemperer, Paul, A New Payment Rule for Core-Selecting Package Auctions (November 6, 2009). Available at SSRN: https://ssrn.com/abstract=1478658 or http://dx.doi.org/10.2139/ssrn.1478658

Aytek Erdil

University of Cambridge ( email )

Faculty of Economics
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

Paul Klemperer (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 278 588 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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