Optimal Combinatorial Mechanism Design
AbstractWe consider an optimal mechanism design problem with several heterogeneous objects and interdependent values. We characterize ex post incentives using an appropriate monotonicity condition and reformulate the problem in such a way that the choice of an allocation rule can be separated from the choice of the payment rule. Central to our analysis is the formulation of a regularity condition, which gives a recipe for the optimal mechanism. If the problem is regular, then an optimal mechanism can be obtained by solving a combinatorial allocation problem in which objects are allocated in a way to maximize the sum of "virtual" valuations. We identify conditions that imply regularity for two nonnested environments using the techniques of supermodular optimization.
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Bibliographic InfoPaper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0903.
Length: 42 pages
Date of creation: Feb 2009
Date of revision:
Other versions of this item:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D60 - Microeconomics - - Welfare Economics - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-CDM-2009-03-14 (Collective Decision-Making)
- NEP-CTA-2009-03-14 (Contract Theory & Applications)
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