Bidding Strategy in Proxied Package Auctions with Complementarities

This paper investigates bidding strategy in a package auction under incomplete information. I consider a simplified and limited case, where each bidder wants a unique bundle of goods and evaluates them as perfect complements. The auction is standard ascending with package bidding, however, I adopt the “proxy bidding rule.” The auction is interpretted as a limited version of Ausubel and Milgrom (2002)’s ascending proxy auction. I derive the condition under which bidders report their values truthfully in a Bayesian Nash equilibrium even when there are complementarities. Truthful reporting is optimal when the bidders’ geographic relationships with regard to their wants are transitive. This result corresponds to the “threshold problem,” identified in preceding studies. It also implies that package auctions cannot always implement the efficient outcome in package auction problems. JEL classification: D44, D82