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Efficient and optimal mechanisms with private information acquisition costs


  • Lu, Jingfeng
  • Ye, Lixin


In auctions with private information acquisition costs, we completely characterize (socially) efficient and (revenue) optimal two-stage mechanisms, with the first stage being an entry right allocation mechanism and the second stage being a traditional private good provision mechanism. Both efficiency and revenue optimality require that the second-stage selling mechanism be ex post efficient and the number of entry slots be endogenously determined. We show that both efficient and optimal entry can be truthfully implemented in dominant strategies, and can also be implemented via all-pay, though not uniform-price or discriminatory-price, auctions.

Suggested Citation

  • Lu, Jingfeng & Ye, Lixin, 2013. "Efficient and optimal mechanisms with private information acquisition costs," Journal of Economic Theory, Elsevier, vol. 148(1), pages 393-408.
  • Handle: RePEc:eee:jetheo:v:148:y:2013:i:1:p:393-408 DOI: 10.1016/j.jet.2012.12.009

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    References listed on IDEAS

    1. Jingfeng Lu, 2009. "Auction design with opportunity cost," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 73-103, January.
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    Cited by:

    1. Vivek Bhattacharya & James W. Roberts & Andrew Sweeting, 2014. "Regulating bidder participation in auctions," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 675-704, December.
    2. Sweeting, Andrew & Bhattacharya, Vivek, 2015. "Selective entry and auction design," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 189-207.
    3. Xu, Xiaoshu & Levin, Dan & Ye, Lixin, 2013. "Auctions with entry and resale," Games and Economic Behavior, Elsevier, vol. 79(C), pages 92-105.

    More about this item


    Mechanisms; Auctions; Two-stage auctions; Information acquisition; Entry;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design


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