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Implementing the Optimal Auction

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  • Bernard Caillaud
  • Jacques Robert

Abstract

In a general framework with independent private values of the bidders, we propose a game, with a simple economic interpretation, that allows implementing the optimal auction outcome when the seller ignores the distributions of the different bidders' valuations. In this robust or detail-free implementation procedure, a second-price auction is organized and the winner volunteers a payment to the seller; this payment can then be challenged by another bidder who knows the distribution of the winner's valuation. Dans un cadre du modèle d'enchères avec des valeurs privées indépendantes, nous proposons un jeu, ayant une interprétation économique simple, qui permet de mettre en oeuvre les enchères optimales même quand le vendeur ignore les distributions des volontés à payer des différents soumissionnaires. Dans cette procédure robuste (detail-free), une enchère au deuxième prix est organisée et le gagnant de cette enchère propose un paiement au vendeur; ce paiement peut alors être contesté par un autre soumissionnaire qui connaît la distribution de l'évaluation du gagnant.

Suggested Citation

  • Bernard Caillaud & Jacques Robert, 2003. "Implementing the Optimal Auction," CIRANO Working Papers 2003s-31, CIRANO.
  • Handle: RePEc:cir:cirwor:2003s-31
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    File URL: http://www.cirano.qc.ca/files/publications/2003s-31.pdf
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    References listed on IDEAS

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    1. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-1090, October.
    2. Laffont, Jean-Jacques & Ossard, Herve & Vuong, Quang, 1995. "Econometrics of First-Price Auctions," Econometrica, Econometric Society, vol. 63(4), pages 953-980, July.
    3. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
    4. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
    5. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    6. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
    7. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September.
    8. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
    9. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages 74-96, March.
    10. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
    12. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
    13. Donald, S.G. & Paarsch, H.J., 1992. "Maximum Likelihood Estimation in Empirical Models of Auctions," UWO Department of Economics Working Papers 9211, University of Western Ontario, Department of Economics.
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    Cited by:

    1. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.

    More about this item

    Keywords

    Auction; mechanism design; Wilson doctrine; Enchères; design de mécanismes; doctrine de Wilson;

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