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Optimal two-object auctions with synergies

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  • Domenico Menicucci

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Abstract

We design the revenue-maximizing auction for two goods when each buyer has bi-dimensional private information and a superadditive utility function (i.e., a synergy is generated if a buyer wins both goods). In this setting the seller is likely to allocate the goods inefficiently with respect to an environ-ment with no synergies. In particular, if the synergy is large then it may occur that a buyer’s valuations for the goods weakly dominate the valuations of another buyer and the latter one receives the bundle. We link this fact, which contrasts with the results for a setting without synergies, to "non-regular" one-good models.

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File URL: http://www.icer.it/docs/wp2001/Menicucci18-01.pdf
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Bibliographic Info

Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers - Applied Mathematics Series with number 18-2001.

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Length: 31 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:icr:wpmath:18-2001

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Keywords: Multiple-unit Auctions; Multi-dimensional Screening; Bundling;

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  14. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, vol. 54(2), pages 159-163, February.
  15. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
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