SFB 303 Discussion Paper No. A - 321

Author: Kamecke, Ulrich
Title: A Strategic Interpretation of the Gale Shapley Algorithm in a Multi-Item Oral Auction
Abstract: This paper presents a model in which the Gale-Shapely algorithm is used by rational agents to construct the outcome of a one-to-one matching problem in a multi-item oral auction. The sellers' evaluations of the items are common knowledge while the buyers' evaluations are private information. If the buyers bid for the items and an auctioneer rejects the insufficient offers then the GS-algorithm is the only outcome which survives the iterated elimination of dominated strategies. If the sellers keep or reject the bids then the GS-algorithm is the unique strictly perfect equilibrium. An example shows that the conditions of a perfect equilibrium are not sufficient to exclude all the unreasonable outcomes.
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Creation-Date: October 1990
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