Strategy-proof contract auctions and the role of ties |
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| Institution: | 1. Delft University of Technology, Delft, The Netherlands;2. University of Oxford, Oxford, UK;3. Duke University, Durham, USA;1. Center of Economic Research at ETH Zürich (CER-ETH), Switzerland;2. Department of Economics, Maastricht University, Netherlands;1. Guanghua School of Management, Peking University, Beijing, China;2. University of Pittsburgh, United States;1. University of São Paulo, Av. Prof. Luciano Gualberto 908, São Paulo, SP, 05508-900, Brazil;2. FGV/EPGE, Graduate School of Economics, Praia de Botafogo 190, 11th floor, Rio de Janeiro, RJ, 22250-900, Brazil;1. Belk College of Business, University of North Carolina Charlotte, 9201 University City Boulevard, Charlotte, NC 28223-0001, USA;2. Department of Economics, University of Toronto, 150 St. George Street, Toronto, Ontario M5S 3G7, Canada |
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| Abstract: | A contract auction establishes a contract between a center and one of the bidders. As contracts may describe many terms, preferences over contracts typically display indifferences. The Qualitative Vickrey Auction (QVA) selects the best contract for the winner that is at least as good for the center as any of the contracts offered by the non-winning players. When each bidder can always offer a contract with higher utility for the center at an arbitrarily small loss of her own utility, the QVA is the only mechanism that is individually rational, strategy-proof, selects stable outcomes, and is Pareto efficient. For general continuous utility functions, a variant of the QVA involving fixed tie-breaking is strategy-proof and also selects stable outcomes. However, there is no mechanism in this setting that in addition also selects Pareto efficient outcomes. |
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| Keywords: | Contract auction Indifferences Social choice function Strategy-proofness Tie-breaking Weakly transferable utility |
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