Binary Multi-unit Auction against Buyer False-name Bidding

Binary Multi-unit Auction against Buyer False-name Bidding
Author(s): Wang, Wenli and Hidvegi, Zoltan and Whinston, Andrew B.
Year: 2001
Paper Number: GBS-DIA-2001-005
Goizueta Department: Decision and Information Analysis

Abstract

Online auction fraud is currently the number one Internet fraud. This is partially because traditional auction mechanisms fail to accommodate new perspectives of the Internet. For instance, the Generalized Vickrey Auction (GVA) for multi-unit auctions is no longer incentive compatible under buyer false-name bidding; a buyer may reduce his payment by splitting a single legitimate bid for a large bundle of goods to several false-name bids for smaller bundles. We introduce a Binary Vickrey Auction (BVA) where goods are allocated in bundles of powerof- two items. BVA is robust against buyer false-name bidding because it favors bids for a larger bundle with earlier considerations and cheaper prices. BVA is computationally efficient because of the discrete operations. We also extend BVA to handle double auctions.