AUCTIONS FOR GOODS AND UNDERSTANDING CONSUMER PREFERENCES

 

 

 

In 2007, responding to the Northern Rock bank run – Britain’s first since the 1800s – Klemperer invented the “Product-Mix Auction” to improve the Bank of England’s allocation of funds to banks, building societies, etc. (2008, 2010). Mervyn King told The Economist (2012) that “Klemperer auctions [are] a marvellous application of theoretical economics to a practical problem of vital importance to financial markets”. The auctions improve efficiency by simultaneously allocating distinct goods, in this example funds, against different collaterals.

This project will further develop the Product-Mix Auction to make it a practical tool in a broader range of contexts – including non-financial ones.

The work required to extend its range and flexibility will use recently-developed geometric techniques, develop our theory of “demand types” and shed light on a wide range of theoretical issues. It will develop a better characterisation and understanding of economic agents’ preferences when goods are indivisible, yield answers to some deep problems about the existence of economic equilibrium and have applications to matching theory.

We will also develop software implementations of our auction procedures.

 

 

This project is funded by the Economic and Social Research Council

ES/L003058/1