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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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    3. Lotem Ikan & David Lagziel, 2023. "The Indoctrination Game," Papers 2305.02604, arXiv.org.
    4. Aner Sela & Amit Yeshayahu, 2022. "Contests with identity-dependent externalities," Working Papers 2203, Ben-Gurion University of the Negev, Department of Economics.
    5. 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.
    6. Adel Shamaileh, 2016. "An Evaluation of the Effectiveness of Environment Policy in Jordan," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(2), pages 1-92, January.
    7. Brocas, Isabelle, 2014. "Countervailing incentives in allocation mechanisms with type-dependent externalities," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 22-33.
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    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. Luke A. Boosey & Christopher Brown, 2021. "Contests with Network Externalities: Theory & Evidence," Working Papers wp2021_07_02, Department of Economics, Florida State University.

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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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