Core-selecting auctions with incomplete information
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Core-selecting auctions were proposed as alternatives to the Vickrey–Clarke–Groves (VCG) mechanism for environments with complementarities. In this paper, we consider a simple incomplete-information model that allows correlations among bidders’ values. We perform a full equilibrium analysis of three core-selecting auction formats as applied to the “local-local-global” model. We show that seller revenues and efficiency from core-selecting auctions can improve as correlations among bidders’ values increase, producing outcomes that are closer to the true core than are the VCG outcomes. Thus, there may be a theoretical justification for policymakers to utilize core-selecting auctions rather than the VCG mechanism in certain environments.
KeywordsCore-selecting auction Combinatorial auction Vickrey auction VCG mechanism Spectrum auction
JEL ClassificationD44 D47 C72
Compliance with ethical standards
Lawrence M. Ausubel – I am chairman of and have an ownership interest in Power Auctions LLC, a consultancy that provides auction design and software implementation services to governments, non-governmental organizations and commercial enterprises, and I have received fees from Power Auctions exceeding US$10,000 in the past three years. Power Auctions may be considered an “interested” or a “relevant” party to the research reported in this paper. Oleg Baranov – I am an academic associate of Power Auctions LLC, a consultancy that provides auction design and software implementation services to governments, non-governmental organizations and commercial enterprises, and I have received fees from Power Auctions exceeding US$10,000 in the past three years. Power Auctions may be considered an “interested” or a “relevant” party to the research reported in this paper.
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