Product-Mix Auction

Paul Klemperer

No 2018-W07, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: The “Product-Mix Auction” is a single-round auction that can be used whenever an auctioneer wants to sell (or buy) multiple differentiated goods. It allows all participants to express their preferences between varieties, as well as for alternative quantities of specific varieties. Bidders simultaneously make sets of bids. Each of a bidder’s bids can be an "OR” bid that offers a different price for each different variety, and the auction then accepts at most one of the offers from each bid (whichever is best for the bidder given the prices that the auction sets). The graphical solution method makes the operation and merits of the auction easy to explain. The auction is more efficient, and less sensitive to market power, than either running a separate auction for each different variety or running a combined auction with predetermined price differences between varieties. It is also faster, less vulnerable to collusion, and can be easier to use and understand than a simultaneous multiple round auction (SMRA). Moreover, unlike in an SMRA, the auctioneer can specify how the quantities to be sold will depend on the auction prices, by choosing supply functions across varieties. Related material is at www.paulklemperer.org.

Pages: 31 pages
Date: 2018-12-17
New Economics Papers: this item is included in nep-com and nep-des
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https://www.nuffield.ox.ac.uk/economics/Papers/2018/2018W07_productmix.pdf (application/pdf)

Related works:
Working Paper: Product-Mix Auctions (2019)
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