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Optimal Design for an Informed Auctioneer

Listed author(s):
  • Seung Han Yoo

    ()

    (Department of Economics, Korea University, Seoul, Republic of Korea)

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    This paper studies a competitive environment with an informed third party. A considerable number of people are employed to buy things for organizations. However, no satisfactory rationale for them is found in the standard mechanism. In the model, each seller has an additional information dimension that is not associated with a contractible action. The non-contractibility makes a contract incomplete in a direct mechanism with sellers. The solution is to hire a better informed auctioneer and construct an informational hierarchical structure by characterizing his incentives. The optimal compensation for the auctioneer highlights a new role for reserve prices as a revelation device. In addition, we design a practical auction format to implement the optimal mechanism.

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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1702.pdf
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    Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 1702.

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    Date of creation: 2017
    Handle: RePEc:iek:wpaper:1702
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    14. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
    15. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
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    18. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    19. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-1257, November.
    20. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-387, June.
    21. Ilya Segal, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 57-82.
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