An Optimal Multi-Unit Combinatorial Procurement Auction with Single Minded Bidders

TL;DR

This paper introduces an optimal procurement auction for multiple units of multiple items with single-minded bidders, ensuring cost minimization and incentive compatibility under certain conditions.

Contribution

It extends existing combinatorial auction models to handle multiple units and items with single-minded bidders, achieving optimality and incentive compatibility.

Findings

Minimizes procurement costs effectively.

Ensures Bayesian incentive compatibility.

Achieves dominant strategy incentive compatibility under regularity conditions.

Abstract

The current art in optimal combinatorial auctions is limited to handling the case of single units of multiple items, with each bidder bidding on exactly one bundle (single minded bidders). This paper extends the current art by proposing an optimal auction for procuring multiple units of multiple items when the bidders are single minded. The auction minimizes the cost of procurement while satisfying Bayesian incentive compatibility and interim individual rationality. Under appropriate regularity conditions, this optimal auction also satisfies dominant strategy incentive compatibility.