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Optimal Mechanism Design: Type-Independent Preference Orderings

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  • Hitoshi Matsushima

    (Faculty of Economics, The University of Tokyo)

Abstract

We investigate revenue maximization in general allocation problems with incomplete information, where we assume quasi-linearity, private values, independent type distributions, and single-dimensionality of type spaces. We require a mechanism to satisfy strategy-proofness and ex-post individual rationality. We assume that each player has a type-independent preference ordering over deterministic allocations. We show that the Myerson’s technique to solve the incentive-constrained revenue maximization problem in single-unit auctions can be applied to general allocation problems, where the incentive-constrained revenue maximization problem can be reduced to the simple maximization problem of the sum of players’ marginal revenues without imposing any incentive constraint.

Suggested Citation

  • Hitoshi Matsushima, 2015. "Optimal Mechanism Design: Type-Independent Preference Orderings," CIRJE F-Series CIRJE-F-955, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2015cf955
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    References listed on IDEAS

    as
    1. Benjamin Edelman & Michael Schwarz, 2010. "Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions," Harvard Business School Working Papers 10-054, Harvard Business School.
    2. Hitoshi Matsushima, 2012. "Optimal Multiunit Exchange Design," CARF F-Series CARF-F-279, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    3. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    4. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
    5. Benjamin Edelman & Michael Schwarz, 2010. "Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions," American Economic Review, American Economic Association, vol. 100(2), pages 597-602, May.
    6. Levent Ülkü, 2013. "Optimal combinatorial mechanism design," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(2), pages 473-498, June.
    7. Hitoshi Matsushima, 2012. "Optimal Multiunit Exchange Design with Single-Dimensionality," CARF F-Series CARF-F-292, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Sep 2012.
    8. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    9. Nicolás Figueroa & Vasiliki Skreta, 2011. "Optimal allocation mechanisms with single-dimensional private information," Review of Economic Design, Springer;Society for Economic Design, vol. 15(3), pages 213-243, September.
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