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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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File URL: http://hdl.handle.net/10.1007/s00199-006-0123-5
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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. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November.
  2. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
  3. Jeremy Bulow & Paul Klemperer, 1994. "Auctions vs. Negotiations," NBER Working Papers 4608, National Bureau of Economic Research, Inc.
  4. Steven A. Matthews, 1981. "Selling to Risk Averse Buyers with Unobservable Tastes," Discussion Papers 480S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
  6. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
  7. 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.
  8. 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.
  9. 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.
  10. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June.
  11. Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0504, Department of Economics, University of Missouri.
  12. Colin Campbell & Dan Levin, 2006. "When and why not to auction," Economic Theory, Springer, vol. 27(3), pages 583-596, 04.
  13. Harstad, Ronald M., 1991. "Asymmetric bidding in second-price, common-value auctions," Economics Letters, Elsevier, vol. 35(3), pages 249-252, March.
  14. 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.
  15. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
  16. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
  18. 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.
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