Mechanism Design in the Case of Two Objects with the Possibility for Complementarities

Abstract

This research builds upon existing studies in that it investigates the possibility of expanding the mathematical and theoretical models of FPSB auctions, along with a slightly altered versions of this auction format, into a linear program in order to solve it with numerical techniques. The output generated from the linear optimization model suggests that the auction mechanisms being used today for the sale of multiple objects with complementarities may well be inefficient in maximizing seller’s revenue. The results further establish a basis for comparison of equilibrium surplus from the seller’s perspective in the case of an auction with two complementary objects. Moreover, the analytical and numerical results herein serve as a building block for future research examining different mechanism designs that will maximize seller revenue in a given auction.