Characterizing the Vickrey Combinatorial Auction by Induction
12 Pages Posted: 21 Mar 2006
Date Written: March 2005
This note studies the allocation of heterogeneous commodities to agents whose private values for combinations of these commodities are monotonic by inclusion. This setting can accommodate the presence of complementarity and substitutability among the heterogeneous commodities. By using induction logic, we provide an elementary proof of Holmstrom's (1919) characterization of the Vickrey combinatorial auction as the unique efficient, strategy-proof, and individually rational allocation rule. Our proof method can also be applied to domains to which his proof cannot be.
Keywords: Vickrey auction, Strategy-proofness, Induction, Heterogeneous commodities
JEL Classification: D44, C78, D71, D61, D82
Suggested Citation: Suggested Citation