Binary Vickrey auction -: A robust and efficient multi-unit sealed-bid online auction protocol against buyer multi-identity bidding

The multi-unit Vickrey-Clark-Groves (VCG) mechanism has two major weaknesses: it has high computational complexity and monotonicity problems [Paul Milgrom. Putting Auction Theory to Work. Cambridge University Press, Cambridge, UK, 2004] such that if goods are not substitutes for all bidders and if a bidder can submit bids under multiple identities, then the VCG is no longer strategy-proof To address these two weaknesses, we introduce a Binary Vickrey Auction (BVA) where goods are allocated in bundles of sequentially-decreasing power-of-two items in multiple rounds. Because of the discrete allocation operations, the BVA is computationally efficient. It is also robust against buyer multi-identity bidding by discouraging a bidder splitting his single bid for a larger bundle into several bids under multiple bidder identities for smaller bundles because the BVA favors bids for larger bundles with earlier considerations and cheaper prices. (c) 2006 Elsevier B.V. All rights reserved.