Draft Auctions

 

We introduce “draft auctions”, which is a sequential auction format where at each iteration players bid for the right to buy items at a fixed price. We show that draft auctions offer an exponential improvement in social welfare at equilibrium over sequential item auctions where predetermined items are auctioned at each time step. Specifically, we show that for any subadditive valuation the social welfare at equilibrium is an O(log^2 m) approximation to the optimal social welfare, where m is the number of items, and a corresponding O(log m) bound for submodular valuations. This is in contrast to an Omega(m) lower bound for sequential item auctions, for a simple subclass of submodular valuations. Our results suggest that draft auctions are a better alternative in instances where sequential item auctions are used, such as government auctions of autos and real estate, wine, art and jewelry auctions at auction houses such as Sotheby’s and Christie’s, auctions for players in a professional sports league such as the Indian Premiere League, etc. 

 

Joint work with Jamie Morgenstern and Vasilis Syrgkanis.