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Optimal allocation mechanisms with type-dependent negative externalities

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  • Isabelle Brocas

Abstract

I analyze optimal auction design in the presence of linear type-dependent negative externalities. I characterize the properties of the optimal mechanism when externalities are “strongly decreasing” and “increasing” in the agent’s valuation and I discuss its implementation with sealed-bid auctions. Interestingly, bidding strategies are not necessarily increasing in valuations, and the optimal mechanism can be implemented by setting a price ceiling instead of a reserve price. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Isabelle Brocas, 2013. "Optimal allocation mechanisms with type-dependent negative externalities," Theory and Decision, Springer, vol. 75(3), pages 359-387, September.
    • Handle: RePEc:kap:theord:v:75:y:2013:i:3:p:359-387
    DOI: 10.1007/s11238-012-9345-0
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    2. Cherbonnier, Frédéric & Salant, David & Van Der Straeten, Karine, 2021. "Getting auctions for transportation capacity to roll," TSE Working Papers 21-1254, Toulouse School of Economics (TSE).
    3. Aner Sela & Amit Yeshayahu, 2022. "Contests with identity-dependent externalities," Working Papers 2203, Ben-Gurion University of the Negev, Department of Economics.
    4. Brocas, Isabelle, 2014. "Countervailing incentives in allocation mechanisms with type-dependent externalities," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 22-33.
    5. Baik, Kyung Hwan & Jung, Hanjoon Michael, 2021. "Contests with multiple alternative prizes: Public-good/bad prizes and externalities," Journal of Mathematical Economics, Elsevier, vol. 92(C), pages 103-116.
    6. Luke A. Boosey & Christopher Brown, 2021. "Contests with Network Externalities: Theory & Evidence," Working Papers wp2021_07_02, Department of Economics, Florida State University.
    7. Shanjun Li, 2018. "Better Lucky Than Rich? Welfare Analysis of Automobile Licence Allocations in Beijing and Shanghai," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2389-2428.
    8. Alexandre Belloni & Changrong Deng & Saša Pekeč, 2017. "Mechanism and Network Design with Private Negative Externalities," Operations Research, INFORMS, vol. 65(3), pages 577-594, June.
    9. Chulyoung Kim & Sang-Hyun Kim & Jinhyuk Lee & Jaeok Park, 2023. "Auctions with Externalities: An Experimental Study," Working papers 2023rwp-214, Yonsei University, Yonsei Economics Research Institute.
    10. Lotem Ikan & David Lagziel, 2023. "The Indoctrination Game," Papers 2305.02604, arXiv.org.

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    More about this item

    Keywords

    Auctions; Type-dependent externalities; Mechanism design; D44; D62;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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