Optimal complementary auctions
AbstractThis paper considers the situation where two products are sold by the same seller, but to disjoint sets of potential buyers. Externalities may arise from each market outcome to the other. The paper examines the nature of the seller's optimal mechanism, and, for example in the case of positive externalities, it is shown that the allocation decision in either market depends on the highest types in both markets. The optimal mechanism can be implemented by an indirect mechanism that essentially charges winning bidders for the value of their externalities. The analysis is applied to the sale of public sector franchises including exploration and development rights for oil and gas tracts.
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Bibliographic InfoPaper provided by University College London in its series Open Access publications from University College London with number http://discovery.ucl.ac.uk/16383/.
Date of creation: Apr 2001
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Publication status: Published in Bulletin of Economic Research (2001-04) v.53, p.81-100
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