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Optimal auctions with asymmetric financial externalities

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  • Lu, Jingfeng

Abstract

This paper studies optimal auction design with asymmetric linear financial externalities among bidders. When the matrix Γ that relates biddersʼ payoffs to their payments is nonsingular, the payment-related component in the design objective must equal a unique linear combination of its counterparts in bidderʼs payoffs. If all multipliers of the linear combination are nonnegative, a modified Myerson procedure is discovered for deriving the optimal design. If any multiplier is negative, an arbitrarily high value can be achieved for design objective by setting proper fixed transfers to bidders. When the matrix Γ is singular, the unbounded optimum result typically prevails. We applied our method to auctions with cross shareholdings and charity auctions for revenue-maximizing and efficient designs.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 74 (2012)
Issue (Month): 2 ()
Pages: 561-575

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Handle: RePEc:eee:gamebe:v:74:y:2012:i:2:p:561-575

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Auction design; Charity auction; Cross shareholdings; Effective payments; Financial externalities; Payment-coefficient matrix;

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References

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Citations

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Cited by:
  1. Dodonova, Anna & Khoroshilov, Yuri, 2014. "Can preemptive bidding in takeover auctions be socially optimal? Yes it can," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 34-47.
  2. Maarten Janssen & Vladimir Karamychev, 2013. "Gaming in Combinatorial Clock Auctions," Tinbergen Institute Discussion Papers 13-027/VII, Tinbergen Institute, revised 16 Dec 2013.
  3. Wasser, Cédric, 2013. "Bilateral k+1-price auctions with asymmetric shares and values," Games and Economic Behavior, Elsevier, vol. 82(C), pages 350-368.
  4. Björn Bartling & Nick Netzer, 2014. "An Externality-Robust Auction: Theory and Experimental Evidence," CESifo Working Paper Series 4771, CESifo Group Munich.
  5. Maarten Janssen & Vladimir Karamychev, 2013. "Gaming in Combinatorial Clock Auctions," Tinbergen Institute Discussion Papers 13-027/VII, Tinbergen Institute, revised 16 Dec 2013.
  6. Björn Bartling & Nick Netzer, 2014. "An externality-robust auction: theory and experimental evidence," ECON - Working Papers 153, Department of Economics - University of Zurich.

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