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Membership mechanism

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  • Yoo, Seung Han

Abstract

The seller seeks to sell two different items by bundling participation. Membership allows only members to buy either item or both. A membership mechanism thus specifies a member set and a fee as well as allocation and payment rules. We first establish the revenue-maximizing mechanism given a modified valuation distribution incorporating the member set, which also resolves the existence problem. The optimal membership mechanism enables us to compare between bundling participation and separate participation, suggesting conditions under which membership dominates selling two goods separately: interplay between the number of bidders and the degree of the stochastic dominance of valuation distributions. This mechanism also provides a rationale for secret reserve prices, a long-standing puzzle in theory.

Suggested Citation

  • Yoo, Seung Han, 2026. "Membership mechanism," Journal of Mathematical Economics, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:mateco:v:124:y:2026:i:c:s0304406826000297
    DOI: 10.1016/j.jmateco.2026.103241
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    Keywords

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    JEL classification:

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

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