Theory of internet auctions

This paper analyzes the effects of false-name bids on combinatorial auction protocols. If there exists no false-name bid, the generalized Vickrey Auction protocol (GVA) satisfies incentive compatibility, Pareto efficiency, and individual rationality. However, if false-name bids are possible, the GVA, nor any combinatorial auction protocol fails to satisfy these three properties at the same time. We developed a new combinatorial auction protocol called the Leveled Division Set (LDS) protocol that satisfies incentive compatibility and individual rationality, and can achieve the social surplus that is very close to Pareto efficient.