Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly
AbstractThe seller of N distinct objects is uncertain about the buyerâs valuation for those objects. The sellerâs problem, to maximize expected revenue, consists of maximizing a linear functional over a convex set of mechanisms. A solution to the sellerâs problem can always be found in an extreme point of the feasible set. We identify the relevant extreme points and faces of the feasible set. With N = 1, the extreme points are easily described providing simple proofs of well-known results. The revenue-maximizing mechanism assigns the object with probability one or zero depending on the buyerâs report. With N > 1, extreme points often involve randomization in the assignment of goods. Virtually any extreme point of the feasible set maximizes revenue for a well-behaved distribution of buyerâs valuations. We provide a simple algebraic procedure to determine whether a mechanism is an extreme point.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 137 (2007)
Issue (Month): 1 (November)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Alejandro M. Manelli & Daniel R. Vincent, 2004. "Multidimensional Mechanism Design: Revenue Maximization and the Multiple-Good Monopoly," Working Papers 2004.153, Fondazione Eni Enrico Mattei.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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