Combinatorial auctions are most commonly used in estate auctions and industrial auctions. In combinatorial auctions, a collection of items is up for auction – both as a package (all the items that make up the collection together), and individually (each individual item making up the collection is a separate lot).
If the package attracts a higher price than all of the individual lots together, then the highest bidder for the package wins the collection, and the highest bidders for the individual lots lose. However, if the highest bid for the package is lower than the highest bids for all the individual lots added together, then the highest bidders for the individual lots win the item they bid for, and the highest bidder for the package loses.
When carried out online, all the lots in a combinatorial auction are auctioned simultaneously. In a live auction, the individual lots are auctioned first, followed by the package. The opening bid for the package is often the price achieved for all the individual lots together.