Advanced Search
MyIDEAS: Login

The Role of Outside Options in Auction Design

Contents:

Author Info

  • Nicolas Figueroa
  • Vasiliki Skreta

Abstract

This paper studies revenue maximizing auctions when buyers’ outside options depend on their private information. The set-up is very general and encompasses a large number of potential applications. The main novel message of our analysis is that with type-dependent non-participation payoffs, the revenue maximizing assignment of objects can crucially depend on the outside options that buyers face. Outside options can therefore affect the degree of efficiency of revenue maximizing auctions. We show that depending on the shape of outside options, sometimes an optimal mechanism will allocate the objects in an ex-post efficient way, and other times, buyers will obtain objects more often than it is efficient. Our characterization rings a bell of caution. Modeling buyers outside options as being independent of their private information, is with loss of generality and can lead to quite misleading intuitions. Our solution procedure can be useful also in other models where type-dependent outside options arise endogenously, because, for instance, buyers can collude or because there are competing sellers. Type-Dependent Outside Options: JEL D44, C7, C72.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.ucla.edu/skreta/data/out.pdf
Download Restriction: no

Bibliographic Info

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 321307000000000140.

as in new window
Length:
Date of creation: 21 Jun 2006
Date of revision:
Handle: RePEc:cla:levrem:321307000000000140

Contact details of provider:
Web page: http://www.dklevine.com/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
  2. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
  3. Fernando Branco, 1996. "Multiple unit auctions of an indivisible good," Economic Theory, Springer, vol. 8(1), pages 77-101.
  4. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, vol. 85(2), pages 258-293, April.
  5. Engelbrecht-Wiggans, Richard, 1988. "Revenue equivalence in multi-object auctions," Economics Letters, Elsevier, vol. 26(1), pages 15-19.
  6. repec:att:wimass:9008 is not listed on IDEAS
  7. Jehiel, Phillipe & Moldovanu, Benny, 1999. "A Note on Revenue Maximization and Efficiency in Multi-Object Auctions," Sonderforschungsbereich 504 Publications 99-73, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  8. J. Riley & E. Maskin, 1981. "Optimal Auctions with Risk Averse Buyers," Working papers 311, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics.
  10. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
  11. Jorge Aseff & Hector Chade, 2004. "An optimal auction with identity-dependent externalities," Econometric Society 2004 Latin American Meetings 254, Econometric Society.
  12. Vijay Krishna & Motty Perry, 1997. "Efficient Mechanism Design," Game Theory and Information 9703010, EconWPA, revised 28 Apr 1998.
  13. Gale, Ian, 1990. "A multiple-object auction with superadditive values," Economics Letters, Elsevier, vol. 34(4), pages 323-328, December.
  14. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
  15. Dana, James Jr. & Spier, Kathryn E., 1994. "Designing a private industry : Government auctions with endogenous market structure," Journal of Public Economics, Elsevier, vol. 53(1), pages 127-147, January.
  16. Armstrong, Mark, 2000. "Optimal Multi-object Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 455-81, July.
  17. Avery, Christopher & Hendershott, Terrence, 2000. "Bundling and Optimal Auctions of Multiple Products," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 483-97, July.
  18. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
  19. Krishna, Vijay & Maenner, Eliot, 2001. "Convex Potentials with an Application to Mechanism Design," Econometrica, Econometric Society, vol. 69(4), pages 1113-19, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Vasiliki Skreta, 2007. "On the Informed Seller Problem: Optimal Information Disclosure," Levine's Bibliography 122247000000001789, UCLA Department of Economics.
  2. Vasiliki Skreta & Nicolas Figueroa, 2007. "A Note on Optimal Auctions," Levine's Bibliography 843644000000000232, UCLA Department of Economics.
  3. Laurent Lamy, 2007. "Contingent Auctions with Allocative Externalities: Vickrey vs. the Ausubel-Milgrom Proxy Auction," 2007 Meeting Papers 427, Society for Economic Dynamics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cla:levrem:321307000000000140. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.