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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. 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.
  2. Fernando Branco, 1996. "Multiple unit auctions of an indivisible good," Economic Theory, Springer, vol. 8(1), pages 77-101.
  3. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  4. Philippe Jehiel & Benny Moldovanu, 1998. "Efficient Design with Interdependent Valuations," Discussion Papers 1244, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Gale, Ian, 1990. "A multiple-object auction with superadditive values," Economics Letters, Elsevier, vol. 34(4), pages 323-328, December.
  6. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
  8. 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.
  9. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, vol. 54(2), pages 159-163, February.
  10. Armstrong, Mark, 2000. "Optimal Multi-object Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 455-81, July.
  11. Krishna, V. & Rosenthal, R.W., 1995. "Simultaneous Auctions with Synergies," Papers 04-95-06, Pennsylvania State - Department of Economics.
  12. Levin, Jonathan, 1997. "An Optimal Auction for Complements," Games and Economic Behavior, Elsevier, vol. 18(2), pages 176-192, February.
  13. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  14. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  15. 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.
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