Groves sealed bid auctions of heterogeneous objects with fair prices

We study the allocation of heterogeneous indivisible objects to agents whose valuations of the objects depend on what other objects they are obtained with. We apply the envyfree criterion to Groves sealed bid auctions, which are value maximizing and dominant strategy incentive compatible for this multi-object allocation problem. First we show that if valuations are unrestricted then there is no Groves auction which ensures that the allocation is always envyfree. We obtain a positive result, however, if the valuations of the objects are superadditive, and give a complete characterization of Groves prices that guarantee envyfreeness for superadditive valuations. Received: 25 April 2001/Accepted: 3 April 2002 I would like to thank Kim Border, Tom Palfrey, and especially John Ledyard for their comments. Special thanks are due to Katya Sherstyuk. Support from a Sloan Dissertation Fellowship is gratefully acknowledged.