Binary Vickrey Auction -- a Robust and Efficient Multi-unit Sealed-bid Auction Against Buyer False-name Bids

Binary Vickrey Auction -- a Robust and Efficient Multi-unit Sealed-bid Auction Against Buyer False-name Bids
Author(s): Wang, Wenli and Hidvegi, Zoltan and Whinston, Andrew B.
Year: 2005
Paper Number: GBS-DIA-2005-006
Goizueta Department: Decision and Information Analysis

Abstract

The multi-unit Vickrey-Clark-Groves (VCG) mechanism has two major weaknesses: it has high computational complexity and, if a bidder can submit bids under multiple false identities, it is no longer strategy-proof. To address these two weaknesses, we introduce a Binary Vickrey Auction (BVA) where goods are allocated in multiple rounds and in bundles of sequentially-decreasing power-of-two items. The BVA is robust against buyer false-name bids because it favors bids for larger bundles with earlier considerations and cheaper prices, and hence it discourages a bidder splitting his single bid for a larger bundle into several bids for smaller bundles under false identities. The BVA is computationally efficient because the allocation operations are discrete. We also extend the BVA for double auctions.