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Optimal Auction Design and Irrelevance of Private Information

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  • Thomas Tröger

    ()

  • Tymofiy Mylovanov

Abstract

We consider the problem of mechanism design by a principal who has private information. We point out a simple condition under which the privacy of the principal's information is irrelevant in the sense that the mechanism implemented by the principal coincides with the mechanism that would be optimal if the principal's information were publicly known. This condition is then used to show that the privacy of the principal's information is irrelevant in many environments with private values and quasi-linear preferences, including the Myerson's classical auction environments in which the seller is privately informed about her cost of selling. Our approach unifies results by Maskin and Tirole, Tan, Yilankaya, Skreta, and Balestrieri. We also provide an example of a classical principal-agent environment with private values and quasi-linear preferences where a privately informed principal can do better than when her information is public.

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse21_2008.

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Length: 28
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:bon:bonedp:bgse21_2008

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: independent private values; optimal auction; resale; inverse virtual valuation function;

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References

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  1. Hector Chade & Randolph Silvers, . "Informed Principal, Moral Hazard, and the Value of a More Informative Technology," Working Papers 2133302, Department of Economics, W. P. Carey School of Business, Arizona State University.
  2. Vasiliki Skreta, 2007. "On the Informed Seller Problem: Optimal Information Disclosure," Levine's Bibliography 122247000000001789, UCLA Department of Economics.
  3. Philip J Reny, 2005. "On the Existence of Monotone Pure Strategy Equilibria in Bayesian Games," Levine's Working Paper Archive 784828000000000413, David K. Levine.
  4. de Clippel, Geoffroy & Minelli, Enrico, 2004. "Two-person bargaining with verifiable information," Journal of Mathematical Economics, Elsevier, vol. 40(7), pages 799-813, November.
  5. Garratt, Rod & Troger, Thomas & Zheng, Charles Zhoucheng, 2007. "Collusion Via Resale," Staff General Research Papers 12829, Iowa State University, Department of Economics.
  6. Roger B. Myerson, 1981. "Mechanism Design by an Informed Principal," Discussion Papers 481, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Michela CELLA, 2007. "Informed principal with correlation," Departmental Working Papers 2007-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  8. Eric W. Bond & Thomas A. Gresik, 1997. "Competition between asymmetrically informed principals," Economic Theory, Springer, vol. 10(2), pages 227-240.
  9. Fleckinger, Pierre, 2007. "Informed principal and countervailing incentives," Economics Letters, Elsevier, vol. 94(2), pages 240-244, February.
  10. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  11. Yeon-Koo Che & Jinwoo Kim, 2006. "Robustly Collusion-Proof Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1063-1107, 07.
  12. Beaudry, Paul, 1994. "Why an Informed Principal May Leave Rents to an Agent," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 821-32, November.
  13. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  14. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
  15. Laffont & Martimort, 1997. "Collusion under asymmetric information," Working Papers 152574, Institut National de la Recherche Agronomique, France.
  16. Guofu Tan, 1996. "Optimal Procurement Mechanisms for an Informed Buyer," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 699-716, August.
  17. Mezzetti, Claudio & Tsoulouhas, Theofanis, 2000. "Gathering information before signing a contract with a privately informed principal," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 667-689, May.
  18. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
  19. Jost, Peter-Jurgen, 1996. "On the Role of Commitment in a Principal-Agent Relationship with an Informed Principal," Journal of Economic Theory, Elsevier, vol. 68(2), pages 510-530, February.
  20. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
  21. Dilip Mookherjee & Masatoshi Tsumagari, 2004. "The Organization of Supplier Networks: Effects of Delegation and Intermediation," Econometrica, Econometric Society, vol. 72(4), pages 1179-1219, 07.
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