Working Paper: CEPR ID: DP7487
Authors: Aytek Erdil; Paul Klemperer
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.
Keywords: Combinatorial auction; Core; Core-selecting auction; Multi-object auction; Package auction; Robust design; Simultaneous ascending auction; Vickrey auction
JEL Codes: C71; D44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reference rules (Y20) | reduced sum across bidders of marginal deviation incentives (D44) |
| reference rules (Y20) | better auction performance (D44) |
| substituting core payments for Vickrey payments (D51) | mitigated issues such as low revenues and collusion (L12) |
| reference rules (Y20) | promote truthful bidding behavior (D44) |