Ascending Auctions witih Package Bidding

Ascending Auctions witih Package Bidding

By
Lawrence M. Ausubel, Paul R. Milgrom
Advances in Theoretical Economics.
2002, Vol. 1, Issue 1, Pages 1534-5963

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.