Optimal Auction Design and Irrelevance of Private Information
AbstractWe 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 InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse21_2008.
Date of creation: Dec 2008
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independent private values; optimal auction; resale; inverse virtual valuation function;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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