Ascending Auctions with Package Bidding

Lawrence M. Ausubel and Paul R. Milgrom
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Lawrence M. Ausubel: University of Maryland
Paul R. Milgrom: Stanford University

The B.E. Journal of Theoretical Economics, 2002, vol. frontiers.1, issue 1

Abstract: A family of ascending package auction models is introduced in which bidders may determine their own packages on which to bid. In the proxy auction (revelation game) versions, the outcome is a point in the core of the exchange economy for the reported preferences. When payoffs are linear in money and goods are substitutes, sincere reporting constitutes a Nash equilibrium and the outcome coincides with the Vickrey auction outcome. Even when goods are not substitutes, ascending proxy auction equilibria lie in the core with respect to the true preferences. Compared to the Vickrey auction, the proxy auctions generate higher equilibrium revenues, are less vulnerable to shill bidding and collusion, can handle budget constraints much more robustly, and may provide better ex ante investment incentives.

Keywords: auction theory; FCC auctions; package bidding; combinatorial bidding; activity rule; bid Improvement rule; e-commerce; electronic commerce (search for similar items in EconPapers)
JEL-codes: D44 C78 (search for similar items in EconPapers)
Date: 2002
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