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Practically Implementable Auction for a Good with Countervailing Positive Externalities

Author

Listed:
  • Bhirombhakdi, Kornpob
  • Potipiti, Tanapong

Abstract

This study theoretically presents a new auction design called "take-or-give auction." The auction solves the free-rider problem in the case of two symmetric and risk-neutral bidders competing for a good with countervailing positive externalities. The auction makes efficient allocation. Moreover, the extension of the auction by addition some rules maximizes the seller's expected revenue.

Suggested Citation

  • Bhirombhakdi, Kornpob & Potipiti, Tanapong, 2012. "Practically Implementable Auction for a Good with Countervailing Positive Externalities," MPRA Paper 42911, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42911
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    File URL: https://mpra.ub.uni-muenchen.de/43609/1/MPRA_paper_43609.pdf
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    References listed on IDEAS

    as
    1. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
    2. Chen, Bo & Potipiti, Tanapong, 2010. "Optimal selling mechanisms with countervailing positive externalities and an application to tradable retaliation in the WTO," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 825-843, September.
    3. 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.
    4. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    5. Bagwell, Kyle & Mavroidis, Petros C. & Staiger, Robert W., 2007. "Auctioning countermeasures in the WTO," Journal of International Economics, Elsevier, vol. 73(2), pages 309-332, November.
    6. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Auction design; positive externalities; countervailing;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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