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Profit maximizing in auctions of public goods

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Author Info

  • ALBOTH, Dirk

    ()
    (FB 17 - Mathematik, Univ. Paderborn, D-33095 Paderborn Germany)

  • LERNER, Anat

    ()
    (Tel-Aviv University, Faculty of Management, Recanati Graduate School of Business Administration, Tel-Aviv, 69978 Israel)

  • SHALEV, Jonathan

    ()
    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

A profit-maximizing auctioneer can provide a public good to a group of agents. Each group member has a private value for the good being provided to the group. We investigate an auction mechanism where the auctioneer provides the good to the group, only if the sum of their bids exceeds a reserve price declared previously by the auctioneer. For the two-bidder case with private values drawn from a uniform distribution we characterize the continuously differentiable symmetric equilibrium bidding functions for the agents, and find the optimal reserve price for the auctioneer when such functions are used by the bidders. We also examine another interesting family of equilibrium bidding functions for this case, with a discrete number of possible bids, and show the relation (in the limit) to the differentiable bidding functions.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998017.

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Date of creation: 01 Feb 1998
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Handle: RePEc:cor:louvco:1998017

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Keywords: public goods; auctions; externalities.;

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  1. repec:wop:humbsf:1996-36 is not listed on IDEAS
  2. d'Aspremont, C & Cremer, J & Gerard-Varet, L-A, 1997. "Unique Implementation in Auctions and in Public Goods Problems," G.R.E.Q.A.M. 97a15, Universite Aix-Marseille III.
  3. Mark Isaac, R. & McCue, Kenneth F. & Plott, Charles R., 1985. "Public goods provision in an experimental environment," Journal of Public Economics, Elsevier, vol. 26(1), pages 51-74, February.
  4. M. Landsberger & J. Rubinstein & E. Wolfstetter & S. Zamir, 1996. "First-Price Auctions when the Ranking of Valuations is Common Knowledge," SFB 373 Discussion Papers 1996,36, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  5. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
  6. Marwell, Gerald & Ames, Ruth E., 1981. "Economists free ride, does anyone else? : Experiments on the provision of public goods, IV," Journal of Public Economics, Elsevier, vol. 15(3), pages 295-310, June.
  7. 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.
  8. Douglas K. Reece, 1978. "Competitive Bidding for Offshore Petroleum Leases," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 369-384, Autumn.
  9. Philippe Jehiel & Benny Moldovanu, 1998. "Auctions with Downstream Interaction," Discussion Papers 1243, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Cornes, Richard & Sandler, Todd, 1984. "Easy Riders, Joint Production, and Public Goods," Economic Journal, Royal Economic Society, vol. 94(375), pages 580-98, September.
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  14. Schneider, Friedrich & Pommerehne, Werner W, 1981. "Free Riding and Collective Action: An Experiment in Public Microeconomics," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 689-704, November.
  15. Lerner, Anat, 1998. "A Pie Allocation Among Sharing Groups," Games and Economic Behavior, Elsevier, vol. 22(2), pages 316-330, February.
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  17. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
  18. George J. Stigler, 1974. "Free Riders and Collective Action: An Appendix to Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 359-365, Autumn.
  19. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
  20. Brubaker, Earl R, 1975. "Free Ride, Free Revelation, or Golden Rule?," Journal of Law and Economics, University of Chicago Press, vol. 18(1), pages 147-61, April.
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  23. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
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Citations

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Cited by:
  1. Stefano Barbieri & David A. Malueg, 2009. "Threshold Uncertainty in the Private-Information Subscription Game," Working Papers 0903, Tulane University, Department of Economics.
  2. Jehiel, Philippe & Moldovanu, Benny, 2006. "Allocative and Informational Externalities in Auctions and Related Mechanisms," CEPR Discussion Papers 5558, C.E.P.R. Discussion Papers.
  3. Murat Yilmaz, 2010. "Auctioning a Discrete Public Good under Incomplete Information," Working Papers 2010/14, Bogazici University, Department of Economics.
  4. Zhi Li & Christopher Anderson & Stephen K. Swallow, 2012. "Uniform Price Mechanisms for Threshold Public Goods Provision: An Experimental Investigation," Working Papers 14, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  5. Liu, Pengfei & Swallow, Stephen K. & Anderson, Christopher M., 2013. "Threshold Level Public Goods Provision with Multiple Units: Experimental Effects of Disaggregated Groups with Rebates," Working Papers 24, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  6. Toth, Sandor F. & Rabotyagov, Sergey S. & Ettl, Gregory J., 2009. "Experimental Testbeds for ECOSEL: A Market Framework for Private Provision of Forest Ecosystem Services," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49565, Agricultural and Applied Economics Association.
  7. Stefano Barbieri & David Malueg, 2008. "Private provision of a discrete public good: efficient equilibria in the private-information contribution game," Economic Theory, Springer, vol. 37(1), pages 51-80, October.

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