Discussion Paper Details

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Title: A New Payment Rule for Core-Selecting Package Auctions

Author(s): Aytek Erdil and Paul Klemperer

Publication Date: October 2009

Keyword(s): combinatorial auction, core, core-selecting auction, multi-object auction, package auction, robust design, simultaneous ascending auction, Vickrey and Vickrey auction

Programme Area(s): Industrial Organization and Public Economics

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.

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Bibliographic Reference

Erdil, A and Klemperer, P. 2009. 'A New Payment Rule for Core-Selecting Package Auctions'. London, Centre for Economic Policy Research.