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
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Group Buying on the Web: A Comparison of Price-Discovery Mechanisms
Krishnan S. Anand,Ravi Aron +1 more
TL;DR: This work derives the monopolist's optimal group-buying schedule under varying conditions of heterogeneity in the demand regimes, and compares its profits with those that obtain under the more conventional posted-price mechanism.
Journal ArticleDOI
Competing mechanisms in a common value environment
TL;DR: In this article, the authors analyze the imperfect competition in a common value environment as a multi-principal game in which liquidity suppliers offer trading mechanisms in a decentralized way, where each liquidity supplier behaves as a monopolist facing a residual demand curve resulting from the maximizing behavior of the informed agent and the trading mechanisms offered by his competitors.
Journal ArticleDOI
Optimal Information Disclosure in Auctions and the Handicap Auction
Péter Eső,Balázs Szentes +1 more
TL;DR: In this paper, a situation where a monopolist is selling an indivisible good to risk neutral buyers who only have an estimate of their private valuations is analyzed, and the seller can release, without observing, certain additional signals that affect the buyers' valuations.
Journal ArticleDOI
An Analysis of the War of Attrition and the All-Pay Auction
Vijay Krishna,John Morgan +1 more
TL;DR: In this article, the authors studied the war of attrition and the all-pay auction with symmetric monotonic equilibrium bidding strategies and examined the performance of these auction forms in terms of the expected revenue accruing to the seller.
Journal ArticleDOI
Dynamic Mechanism Design: A Myersonian Approach
TL;DR: In this article, a necessary condition for incentive compatibility that takes the form of an envelope formula for the derivative of an agent's equilibrium expected payoff with respect to his current type is provided.
References
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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
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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
TL;DR: In this article, it was shown that Groves' scheme is unique on restricted domains which are convex, in particular convex domains, and this generalizes earlier uniqueness results by Green and Laffont and Walker.
Journal ArticleDOI
Optimal contracts with public ex post information
TL;DR: In this paper, the authors derive necessary and sufficient conditions for a public ex post signal (s ∈ S) that is correlated with the risk-neutral seller's costs to render the initial information asymmetry inconsequential to the buyer.