An Efficiency Ranking of Markets Aggregated from Single-Object Auctions

Abstract

In a wide variety of economic contexts, collections of single-object auctions are used to allocate multiple substitutable goods. This paper studies how such collections of auctions aggregate into a multi-object auction market. We identify two features of auction-market design that enhance expected market efficiency: the individual auctions should be conducted in sequence, and information about all of the objects in the sequence should be revealed up front to the bidders. We then show that such an auction market is approximately efficient: specifically, its expected inefficiency is bounded above by the expected efficiency gain associated with adding one more bidder.