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Ex-post full surplus extraction, straightforwardly

  • Vlad Mares


  • Ronald Harstad


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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Article provided by Springer in its journal Economic Theory.

Volume (Year): 32 (2007)
Issue (Month): 2 (August)
Pages: 399-410

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Handle: RePEc:spr:joecth:v:32:y:2007:i:2:p:399-410
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  1. Colin Campbell & Dan Levin, 2006. "When and why not to auction," Economic Theory, Springer, vol. 27(3), pages 583-596, 04.
  2. Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0504, Department of Economics, University of Missouri.
  3. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
  4. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  7. Harstad, Ronald M., 1991. "Asymmetric bidding in second-price, common-value auctions," Economics Letters, Elsevier, vol. 35(3), pages 249-252, March.
  8. Matthews, Steven A., 1983. "Selling to risk averse buyers with unobservable tastes," Journal of Economic Theory, Elsevier, vol. 30(2), pages 370-400, August.
  9. McAfee, R Preston & McMillan, John & Reny, Philip J, 1989. "Extracting the Surplus in the Common-Value Auction," Econometrica, Econometric Society, vol. 57(6), pages 1451-59, November.
  10. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November.
  12. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  13. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  14. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
  15. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October.
  16. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
  17. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
  18. Jeremy Bulow & Paul Klemperer, 1994. "Auctions vs. Negotiations," NBER Working Papers 4608, National Bureau of Economic Research, Inc.
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