Package Auctions and Exchanges


  • Paul Milgrom

    1. Dept. of Economics, Stanford University, Stanford, CA 94305, U.S.A.;
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    • This article is based on the Fisher–Schultz Lecture presented at the 2004 Econometric Society European Meeting. This paper has benefited from the suggestions of many people. Special thanks to Dan Quint, John Hegeman, the editor, and the referees for their detailed comments. Financial support for this research was provided by the National Science Foundation under grant ITR-0427770.


We report recent advances concerning the package allocation problem, in which traders seek to buy or sell combinations of goods. The problems are most difficult when some goods are not substitutes. In that case, competitive equilibrium typically fail to exist but the core is non-empty and comprises the competitive solutions. Also in that case, the Vickrey auction fails to select core allocations and yield revenues that are less than competitive. The Ausubel-Milgrom auction generally selects core allocations and, when goods are substitutes, prescribes the Vickrey allocation. We also evaluate the problems and promise of mechanisms for the package exchange problem.