Characterizing the incentive compatible and Pareto optimal efficiency space for two players, \(k\) items, public budget and quasilinear utilities (Q2346934)

Summary: We characterize the efficiency space of deterministic, dominant-strategy incentive compatible, individually rational and Pareto-optimal combinatorial auctions in a model with two players and \(k\) nonidentical items. We examine a model with multidimensional types, private values and quasilinear preferences for the players with one relaxation: one of the players is subject to a publicly known budget constraint. We show that if it is publicly known that the valuation for the largest bundle is less than the budget for at least one of the players, then Vickrey-Clarke-Groves (VCG) uniquely fulfills the basic properties of being deterministic, dominant-strategy incentive compatible, individually rational and Pareto optimal. Our characterization of the efficient space for deterministic budget constrained combinatorial auctions is similar in spirit to that of \textit{E. S. Maskin} [``Auctions, development and privatization: efficient auctions with liquidity-constrained buyers'', Eur. Econ. Rev. 44, No. 1--6, 667--681 (2000; \url{doi:10.1016/S0014-2921(00)00057-X})] for Bayesian single-item constrained efficiency auctions and comparable with [\textit{L. M. Ausubel} and \textit{P. R. Milgrom}, ``Ascending auctions with package bidding'', Front. Theo. Econ. 1, No. 1, 1--42 (2002)] for non-constrained combinatorial auctions.