Design of online combinatorial auction mechanism for urban land transfer

Abstract

With the wide application of the "Tender, Auction, and Listing" system for land in China, it is of paramount importance to establish a sound land auction mechanism so as to avoid unreasonable land allocation. However, existing studies only focus on developers who are merely concerned about land combinations and offline auctions with low efficiency and high land unsold rate. To further improve land auction mechanism, we modeled the problem of land allocation as an online combinatorial auction. On this basis, we defined a land correction coefficient and designed an optimal online combinatorial auction mechanism that enabled developers to submit multiple combinations of land. Our designed mechanism proved to satisfy both incentive compatibility (IC) and individual rationality (IR), which can prevent developers from lying in the auction while winning higher revenue, reducing land unsold rate, increasing developer turnover rate and promoting the stability of land resource allocation rate. Therefore, online combinatorial auction mechanism, both applicable and efficient, is a practical solution for improving land auctions in China.