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An optimal auction with identity-dependent externalities

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  • Jorge Aseff
  • Hector Chade
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    Abstract

    We analyze the problem of a seller of multiple identical units of a good who faces a set of buyers with unit demands, private information, and identity-dependent externalities. We derive the seller's optimal mechanism and characterize its main properties. We show that the probability that a buyer obtains a unit is an increasing function of the externalities he generates and enjoys. Also, the seller's allocation of the units of the good need not be ex post efficient. As an illustration, we apply the model to the problem faced by a developer of a shopping mall who wants to allocate and price its retail space among anchor and non-anchor stores. We show that a commonly used sequential mechanism is not optimal unless externalities are large enough. Copyright (c) 2008, RAND.

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    Bibliographic Info

    Article provided by RAND Corporation in its journal The RAND Journal of Economics.

    Volume (Year): 39 (2008)
    Issue (Month): 3 ()
    Pages: 731-746

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    Handle: RePEc:bla:randje:v:39:y:2008:i:3:p:731-746

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    Cited by:
    1. Chen, Bo & Potipiti, Tanapong, 2010. "Optimal selling mechanisms with countervailing positive externalities and an application to tradable retaliation in the WTO," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 825-843, September.
    2. Nicolás Figueroa & Vasiliki Skreta, 2011. "Optimal allocation mechanisms with single-dimensional private information," Review of Economic Design, Springer, vol. 15(3), pages 213-243, September.
    3. Rtischev, Dimitry, 2009. "Licensing of a lower-cost production process to an asymmetric Cournot duopoly," MPRA Paper 23017, University Library of Munich, Germany.
    4. Isabelle Brocas, 2013. "Optimal allocation mechanisms with type-dependent negative externalities," Theory and Decision, Springer, vol. 75(3), pages 359-387, September.

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