The effect of false-name bids in combinatorial auctions: new fraud in internet auctions

We examine the effect of false-name bids on combinatorial auction protocols. Falsename bids are bids submitted by a single bidder using multiple identifiers such as multiple e-mail addresses. The obtained results are summarized as follows: 1) The Vickrey-Clarke-Groves (VCG) mechanism, which is strategy-proof and Pareto efficient when there exists no false-name bids, is not false-name-proof, 2) There exists no false-name-proof combinatorial auction protocol that satisfies Pareto efficiency, 3) One sufficient condition where the VCG mechanism is false-name-proof is identified, i.e., the concavity of a surplus function over bidders. JEL classification: D44