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A New Payment Rule for Core-Selecting Package Auctions

Aytek Erdil and Paul Klemperer ()

Journal of the European Economic Association, 2010, vol. 8, issue 2-3, 537-547

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. (JEL: D44, C71) (c) 2010 by the European Economic Association.

JEL-codes: D44 C71 (search for similar items in EconPapers)
Date: 2010
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Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti

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