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Optimal two-object auctions with synergies

  • Domenico Menicucci

    ()

We design the revenue-maximizing auction for two objects when each buyer has bi-dimensional private information and a superadditive utility function (i.e., a synergy is generated if a buyer wins both goods). In this setting the seller is likely to allocate the objects inefficiently with respect to an environment with no synergies (see Armstrong, RES (2000)). In particular, the objects may be bundled too rarely or a buyer may win the bundle even though her valuations for the goods are weakly dominated by the values of another buyer. Copyright Springer-Verlag Berlin/Heidelberg 2003

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File URL: http://hdl.handle.net/10.1007/s10058-003-0096-9
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Article provided by Springer in its journal Review Economic Design.

Volume (Year): 8 (2003)
Issue (Month): 2 (October)
Pages: 143-164

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Handle: RePEc:spr:reecde:v:8:y:2003:i:2:p:143-164
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  1. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April.
  2. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, vol. 54(2), pages 159-163, February.
  3. Rosenthal, Robert W. & Wang, Ruqu, 1996. "Simultaneous Auctions with Synergies and Common Values," Games and Economic Behavior, Elsevier, vol. 17(1), pages 32-55, November.
  4. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1997. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 497-527, 09.
  5. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  6. Krishna, Vijay & Rosenthal, Robert W., 1996. "Simultaneous Auctions with Synergies," Games and Economic Behavior, Elsevier, vol. 17(1), pages 1-31, November.
  7. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  8. Armstrong, Mark, 2000. "Optimal Multi-object Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 455-81, July.
  9. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-59, September.
  10. repec:att:wimass:9008 is not listed on IDEAS
  11. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  12. Fernando Branco, 1996. "Multiple unit auctions of an indivisible good," Economic Theory, Springer, vol. 8(1), pages 77-101.
  13. Levin, Jonathan, 1997. "An Optimal Auction for Complements," Games and Economic Behavior, Elsevier, vol. 18(2), pages 176-192, February.
  14. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
  15. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Gale, Ian, 1990. "A multiple-object auction with superadditive values," Economics Letters, Elsevier, vol. 34(4), pages 323-328, December.
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