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Mechanism Design with Interdependent Valuations: Surplus Extraction

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  • Claudio Mezzetti

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Abstract

If valuations are interdependent and agents observe their own allocation payoffs, then two-stage revelation mechanisms expand the set of implementable decision functions. In a two-stage revelation mechanism agents report twice. In the first stage - before the allocation is decided - they report their private signals. In the second stage - after the allocation has been made, but before final transfers are decided - they report their payoffs from the allocation. Conditions are provided under which an uninformed seller can extract (or virtually extract) the full surplus from a sale to privately informed buyers, in spite of the buyers’ signals being independent random variables.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 05/1.

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Date of creation: Feb 2005
Date of revision: Mar 2006
Handle: RePEc:lec:leecon:05/1

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Keywords: Auctions; Surplus Extraction; Interdependent Valuations; Mechanism Design;

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References

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  1. Claudio Mezzetti, 2004. "Mechanism Design with Interdependent Valuations: Efficiency," Econometrica, Econometric Society, Econometric Society, vol. 72(5), pages 1617-1626, 09.
  2. Moez Bennouri & Sonia Falconieri, 2006. "Optimal auctions with asymmetrically informed bidders," Economic Theory, Springer, Springer, vol. 28(3), pages 585-602, 08.
  3. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, Econometric Society, vol. 53(2), pages 345-61, March.
  4. Roger B. Myerson, 1984. "Multistage Games with Communication," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 590, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. RICHARD McLEAN & ANDREW POSTLEWAITE, 2004. "Informational Size and Efficient Auctions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71, pages 809-827, 07.
  6. Steven R. Williams & Georgia Kosmopoulou, 1998. "The robustness of the independent private value model in Bayesian mechanism design," Economic Theory, Springer, Springer, vol. 12(2), pages 393-421.
  7. Gresik, Thomas A., 1991. "Ex ante incentive efficient trading mechanisms without the private valuation restriction," Journal of Economic Theory, Elsevier, Elsevier, vol. 55(1), pages 41-63, October.
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Cited by:
  1. Johannes Horner & Satoru Takahashi & Nicolas Vieille, 2013. "Truthful Equilibria in Dynamic Bayesian Games," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1933, Cowles Foundation for Research in Economics, Yale University.
  2. Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Kosenok, Grigory & Severinov, Sergei, 2008. "Individually rational, budget-balanced mechanisms and allocation of surplus," Journal of Economic Theory, Elsevier, Elsevier, vol. 140(1), pages 126-161, May.
  4. Papakonstantinou, A. & Rogers, A & Gerding, E. H. & Jennings, N. R., 2010. "Mechanism Design for the truthful elicitation of costly probabilistic estimates in Distributed Information Systems," MPRA Paper 43324, University Library of Munich, Germany.
  5. Abhishek, Vineet & Hajek, Bruce & Williams, Steven R., 2013. "Auctions with a profit sharing contract," Games and Economic Behavior, Elsevier, Elsevier, vol. 77(1), pages 247-270.
  6. Stefano Galavotti & Nozomu Muto & Daisuke Oyama, 2011. "On efficient partnership dissolution under ex post individual rationality," Economic Theory, Springer, Springer, vol. 48(1), pages 87-123, September.
  7. Dash, Rajdeep K & Giovannucci, Andrea & Jennings, Nicholas R. & Mezzetti, Claudio & Ramchurn, Sarvapali D. & Rodriguez-Aguilar, Juan A., 2008. "Trust-Based Mechanisms for Robust and Efficient Task Allocation in the Presence of Execution Uncertainty," The Warwick Economics Research Paper Series (TWERPS) 880, University of Warwick, Department of Economics.
  8. Renato Gomes & Alessandro Pavan, 2011. "Price Discrimination in Many-to-Many Matching Markets," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1540, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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