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Ex-post full surplus extraction, straightforwardly

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  • Vlad Mares
  • Ronald Harstad

Abstract

Consider an estimate of the common value of an auctioned asset that is symmetric in the bidders' types. Such an estimate can be represented solely in terms of the order statistics of those types. This representation forms the basis for a pricing rule yielding truthful bidding as an equilibrium, whether bidders'types are affiliated or independent. We highlight the link between the estimator and full surplus extraction, providing a necessary and suffient condition for ex-post full surplus extraction, including the possibility of independent types. The results offer sharp insights into the strengths and limits of simple auctions by identifying the source of informational rents in such environments.
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  • Vlad Mares & Ronald Harstad, 2007. "Ex-post full surplus extraction, straightforwardly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 399-410, August.
    • Handle: RePEc:spr:joecth:v:32:y:2007:i:2:p:399-410
    DOI: 10.1007/s00199-006-0123-5
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    Cited by:

    1. Justin Jia & Ronald M. Harstad & Michael H. Rothkopf, 2010. "Information Variability Impacts in Auctions," Decision Analysis, INFORMS, vol. 7(1), pages 137-142, March.
    2. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.
    3. Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0504, Department of Economics, University of Missouri.
    4. Reiss, J. Philipp & Levin, Dan, 2013. "Could we overcome the Winner's Curse by (behavioral) auction design?," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79926, Verein für Socialpolitik / German Economic Association.
    5. Mares Vlad & Shor Mikhael, 2012. "On the Competitive Effects of Bidding Syndicates," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-33, September.

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    More about this item

    Keywords

    Common-value auctions; Full surplus extraction; Ex-post individual rationality; Mechanism design; D44; D82; D61; C72;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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