Strategy-proof contract auctions and the role of ties

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. (C) 2013 Elsevier Inc. All rights reserved.