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Optimal Deterministic Mechanism Design: Type‐Independent Preference Orderings

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  • Hitoshi Matsushima

Abstract

We investigate revenue maximisation 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 be deterministic, strategy‐proof and ex‐post individually rational. 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 maximisation problem in single‐unit auctions can be applied to general allocation problems, where the incentive‐constrained revenue maximisation problem can be reduced to the simple maximisation problem of the sum of players’ virtual valuations without imposing any incentive constraint.

Suggested Citation

  • Hitoshi Matsushima, 2018. "Optimal Deterministic Mechanism Design: Type‐Independent Preference Orderings," The Japanese Economic Review, Japanese Economic Association, vol. 69(4), pages 363-373, December.
    • Handle: RePEc:bla:jecrev:v:69:y:2018:i:4:p:363-373
    DOI: 10.1111/jere.12176
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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