Auction Theory, 2nd Edition

17.2 Position Auctions 249

of a worker-firm matching problem. Proofs of the result that the gross substi-

tutes condition implies that the surplus function w is submodular may be found

in Ausubel and Milgrom (2002) and in the book by Milgrom (2004). The latter

contains a very readable account of the theory of package auctions.

While the ascending package auction (and its proxy version) seems like a

very natural mechanism, it places substantial computational demands on both

the seller and the bidders. For instance, in each round, the seller is asked to

compute the set of provisionally winning bids and bidders are asked to compute

the package that is most profitable. These computations are no less complex than

those required by the VCG mechanism.

The allocation ...