Optimal Design for a Partially Informed Auctioneer
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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