Journal ArticleDOI
Full extraction of the surplus in bayesian and dominant strategy auctions
Jacques Cremer,Richard P. McLean +1 more
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In this article, the authors consider auctions for a single indivisible object, in which the bidders have information about each other which is not available to the seller and show that the seller can use this information to his own benefit, and completely characterize the environ- ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about the bidder's willingness to pay.Abstract:
We consider auctions for a single indivisible object, in the case where the bidders have information about each other which is not available to the seller. We show that the seller can use this information to his own benefit, and we completely characterize the environ- ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder's willingness to pay. We provide this characterization for auctions in which the bidders have dominant strate- gies, and for those where the relevant equilibrium concept is Bayesian Nash. In both set-ups, the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties. WE CONSIDER the situation in which an agent, the seller, possesses one indivisible unit of a good to which he attaches no value. But the good has value to a number of potential buyers, and its transfer to one of them would increase social welfare. In particular, the transfer to the buyer with the highest valuation maximizes social welfare. In this paper, we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay. If the seller had full information about the reservation prices of potential buyers, his optimal selling strategy would be very simple. He would announce a price equal or very close to the highest reservation value. The optimal strategy for the bidder with the highest evaluation would be to accept the offer. (Note that we are treating a situation in which the seller can commit himself to a price.) As a result of the exchange, the utility of the seller increases by the full amount of the increase in social welfare, and he has been able to fully extract the surplus. In many circumstances, however, a seller has only imperfect knowledge of the buyers' willingnesses to pay. In this case, he must find some mechanism, or auction, which will enable him to maximize his benefit from the sale of the object. The auction literature starts with this observation and shows how the seller can, by an astute choice of auction, extract the largest possible fraction of the surplus. In general, the literature has shown that this proportion is strictly less than one. In some circumstances, the bidders will have information about each other which is not available to the seller. For instance, in auctions for petroleum drilling rights, bidders know the results of geological tests which they haveread more
Citations
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Eliciting Honest Feedback in Electronic Markets
TL;DR: In this article, a payment-based system is proposed to induce honest reporting of feedback, where the incentive payment to each buyer is charged to someone other than the one whose report that buyer is asked to predict.
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Mechanism design with maxmin agents: Theory and an application to bilateral trade
TL;DR: In this article, the authors consider the problem of determining when a social choice rule is implementable under the assumption that agents know each other's expected valuation of the good, but are pessimistic about how the other agent might acquire information before participating in the mechanism.
Posted Content
Ex-Post Incentive Compatible Mechanism Design
Jeffrey C. Ely,Kim-Sau Chung +1 more
TL;DR: This work characterize ex post incentive compatible public decision rules, and applies this characterization to bilateral trade and public good provision.
Book ChapterDOI
Chapter 60 Nonparametric Approaches to Auctions
Susan Athey,Philip A. Haile +1 more
TL;DR: In this paper, structural econometric approaches to auctions are discussed, including first-price sealed-bid and ascending auctions, including extensions to Dutch auctions, Internet auctions, multi-unit auctions, and multi-object auctions.
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Designing credit agent incentives to prevent mission drift in pro-poor microfinance institutions
TL;DR: In this paper, the authors show that while giving incentives has no cost in for-profit microfinance institutions, it is costly in pro-poor MFIs: when repayment and wealth are positively correlated, a propoor MFI cannot obtain the selection of poor clients in the proportion it wishes with incentives based solely on repayment.
References
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Journal ArticleDOI
Optimal Auction Design
TL;DR: Optimal auctions are derived for a wide class of auction design problems when the seller has imperfect information about how much the buyers might be willing to pay for the object.
Journal ArticleDOI
Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods
Journal ArticleDOI
Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist when Demands are Interdependent
Jacques Cremer,Richard P. McLean +1 more
TL;DR: In this article, the optimal design of resource allocation mechanisms in the presence of asymmetric information was studied and sufficient conditions were provided under which the seller can extract the full surplus from the buyers in an "ex post Nash" equilibrium.
Journal ArticleDOI
Groves' scheme on restricted domains
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Journal ArticleDOI
Optimal contracts with public ex post information
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