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Optimal combinatorial mechanism design

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We consider an optimal mechanism design problem with several heterogenous objects and interdependent values. We characterize ex post incentives using an appropriate monotonicity condition and reformulate the problem in such a way that the choice of an allocation rule can be separated from the choice of the payment rule. Central to the analysis is the formulation of a regularity condition, which gives a recipe for the optimal mechanism. If the problem is regular, then an optimal mechanism can be obtained by solving a combinatorial allocation problem in which objects are allocated in a way to maximize the sum of virtual valuations. We identify conditions that imply regularity using the techniques of supermodular optimization. Copyright Springer-Verlag 2013

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File URL: http://hdl.handle.net/10.1007/s00199-012-0700-8
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 53 (2013)
Issue (Month): 2 (June)
Pages: 473-498

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Handle: RePEc:spr:joecth:v:53:y:2013:i:2:p:473-498
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  1. Krishna, Vijay, 2003. "Asymmetric English auctions," Journal of Economic Theory, Elsevier, vol. 112(2), pages 261-288, October.
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  7. Nikolai Kukushkin, 2013. "Monotone comparative statics: changes in preferences versus changes in the feasible set," Economic Theory, Springer, vol. 52(3), pages 1039-1060, April.
  8. Monteiro, Paulo Klinger, 1999. "Optimal Auctions in a General Model of Identical Goods," Economics Working Papers (Ensaios Economicos da EPGE) 358, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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  10. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
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