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Extraction of the surplus in standard auctions [revised July 2002]

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  • Massimiliano Amarante

    ()
    (Department of Economics, Columbia University)

Abstract

Crer and McLean [2] and McAfee and Reny [4] showed that, in "nearly all auctions", the seller can offer a mechanism that obtains full rent extraction. Later, Robert [8] showed that the result fails in the presence of either limited liability or risk aversion. This paper provides yet another reason. It shows that the full rent extraction result fails if the seller is restricted to using auctions where the bidders’ payments to the seller depend on the bids alone. Our interest for this problem is motivated by the fact that both the "standard model of auction" ([3]) as well as the most popular auctions display this feature. As a general matter, the proof shows that full rent extraction results fail whenever the mechanism uses only part of the information embodied in a player type.

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Bibliographic Info

Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-73.

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Length: 19 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:clu:wpaper:0102-73

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