A New Payment Rule for Core-Selecting Package Auctions

18 Pages Posted: 17 Nov 2009

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

JEL Classification: C71, D44

Suggested Citation

Erdil, Aytek and Klemperer, Paul, A New Payment Rule for Core-Selecting Package Auctions (October 2009). CEPR Discussion Paper No. DP7487. Available at SSRN: https://ssrn.com/abstract=1507484

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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