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Profit Maximizing in Auctions of Public Goods

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Author Info

  • Dirk Alboth

    (Paderborn University)

  • Anat Lerner

    (Tel-Aviv University)

  • Jonathan Shalev

    (CORE)

Abstract

A profit-maximizing auctioneer can provide a public good to a group of agents. Each group member has a private value for the good being provided to the group. We investigate an auction mechanism where the auctioneer provides the good to the group, only if the sum of their bids exceeds a reserve price declared previously by the auctioneer. For the two-bidder case with private values drawn from a uniform distribution we characterize the continuously differentiable symmetric equilibrium bidding functions for the agents, and find the optimal reserve price for the auctioneer when such functions are used by the bidders. We also examine another interesting family of equilibrium bidding functions for this case, with a discrete number of possible bids, and show the relation (in the limit) to the differentiable bidding functions.

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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 9707010.

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Length: 32 pages
Date of creation: 22 Jul 1997
Date of revision: 01 Apr 1998
Handle: RePEc:wpa:wuwpga:9707010

Note: Type of Document - LaTeX; prepared on IBM PC; to print on PostScript; pages: 32 ; figures: 3 eps files included. Comments welcome
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Web page: http://128.118.178.162

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Keywords: public goods; auctions; externalities;

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References

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  1. d'Aspremont, C & Cremer, J & Gerard-Varet, L-A, 1997. "Unique Implementation in Auctions and in Public Goods Problems," G.R.E.Q.A.M. 97a15, Universite Aix-Marseille III.
  2. Michael Landsberger & Jacob Rubinstein & Elmar Wolfstetter & Shmuel Zamir, 1999. "First-Price Auctions when the Ranking of Valuations is Common Knowledge," Working Papers 99-18, Centre de Recherche en Economie et Statistique.
  3. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
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  9. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Auctions with Downstream Interaction among Buyers," Sonderforschungsbereich 504 Publications 97-06, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
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  15. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. repec:wop:humbsf:1996-36 is not listed on IDEAS
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    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  18. Brubaker, Earl R, 1975. "Free Ride, Free Revelation, or Golden Rule?," Journal of Law and Economics, University of Chicago Press, vol. 18(1), pages 147-61, April.
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  21. Robert B. Wilson, 1967. "Competitive Bidding with Asymmetric Information," Management Science, INFORMS, vol. 13(11), pages 816-820, July.
  22. Philippe Jehiel & Benny Moldovanu, 1998. "Auctions with Downstream Interaction," Discussion Papers 1243, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  23. Cornes, Richard & Sandler, Todd, 1984. "Easy Riders, Joint Production, and Public Goods," Economic Journal, Royal Economic Society, vol. 94(375), pages 580-98, September.
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Citations

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Cited by:
  1. Philippe Jehiel & Benny Moldovanu, 2006. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Levine's Bibliography 122247000000001129, UCLA Department of Economics.
  2. Murat Yilmaz, 2010. "Auctioning a Discrete Public Good under Incomplete Information," Working Papers 2010/14, Bogazici University, Department of Economics.
  3. Stefano Barbieri & David A. Malueg, 2009. "Threshold Uncertainty in the Private-Information Subscription Game," Working Papers 0903, Tulane University, Department of Economics.
  4. Toth, Sandor F. & Rabotyagov, Sergey S. & Ettl, Gregory J., 2009. "Experimental Testbeds for ECOSEL: A Market Framework for Private Provision of Forest Ecosystem Services," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49565, Agricultural and Applied Economics Association.
  5. Liu, Pengfei & Swallow, Stephen K. & Anderson, Christopher M., 2013. "Threshold Level Public Goods Provision with Multiple Units: Experimental Effects of Disaggregated Groups with Rebates," Working Papers 24, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  6. Zhi Li & Christopher Anderson & Stephen K. Swallow, 2012. "Uniform Price Mechanisms for Threshold Public Goods Provision: An Experimental Investigation," Working Papers 14, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  7. Stefano Barbieri & David Malueg, 2008. "Private provision of a discrete public good: efficient equilibria in the private-information contribution game," Economic Theory, Springer, vol. 37(1), pages 51-80, October.

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