The Vickrey-Target Strategy and the Core in Ascending Combinatorial Auctions

This paper considers a general class of combinatorial auctions with ascending prices, which includes the Vickrey-Clarke-Groves mechanism and core-selecting auctions. We analyze incentives in ascending combinatorial auctions under complete and perfect information. We show that in every ascending auction, the “Vickrey-target strategy” constitutes a subgame perfect equilibrium with a restricted strategy space. The equilibrium outcome is in the bidder-optimal core and unique under some criteria. This implies equilibrium selection is done by an ascending price scheme from many equilibria of sealed-bid auctions. The equilibrium outcome is “unfair” in the sense that winners with low valuations tend to earn high profits. The payoff non-monotonicity may lead to inefficiency in the equilibrium under unrestricted strategy space. JEL classification: D44, C7