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Optimal two-object auctions with synergies

  • Domenico Menicucci

    ()

We design the revenue-maximizing auction for two goods 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 goods inefficiently with respect to an environ-ment with no synergies. In particular, if the synergy is large then it may occur that a buyer’s valuations for the goods weakly dominate the valuations of another buyer and the latter one receives the bundle. We link this fact, which contrasts with the results for a setting without synergies, to "non-regular" one-good models.

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File URL: http://servizi.sme.unito.it/icer_repec/RePEc/icr/wp2001/Menicucci18-01.pdf
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Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers - Applied Mathematics Series with number 18-2001.

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Length: 31 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:icr:wpmath:18-2001
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  1. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  2. Robert W. Rosenthal & Ruqu Wang, 1995. "Simultaneous Auctions with Synergies and Common Values," Papers 0060, Boston University - Industry Studies Programme.
  3. Jéhiel, Philippe & Moldovanu, Benny, 1999. "Efficient design with interdependent valuations," Papers 99-74, Sonderforschungsbreich 504.
  4. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
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  6. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, vol. 54(2), pages 159-163, February.
  7. Mark Armstrong, 2000. "Optimal Multi-Object Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 455-481.
  8. Gale, I., 1990. "A Multiple-Object Auction With Superadditive Values," Working papers 9008, Wisconsin Madison - Social Systems.
  9. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  10. Levin, Jonathan, 1997. "An Optimal Auction for Complements," Games and Economic Behavior, Elsevier, vol. 18(2), pages 176-192, February.
  11. 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.
  12. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1998. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Papers of Peter Cramton 97jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  13. J. Riley & E. Maskin, 1981. "Optimal Auctions with Risk Averse Buyers," Working papers 311, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Fernando Branco, 1996. "Multiple unit auctions of an indivisible good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 77-101.
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