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Membership Mechanisms

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  • Seung Han Yoo

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

Abstract

This paper studies an environment in which a seller seeks to sell two different items to buyers. The seller designs a membership mechanism that assigns positive allocations to members only. A membership mechanism specifies a member set and a membership fee as well as allocation and payment rules for the two goods. Among such mechanisms with bundling participation, we first establish the revenue-maximizing allocation rule given a regularity condition for a modified valuation distribution that reflects the set, which resolves the existence problem of a member set and results in a simple optimal payment rule. The optimal allocation rule enables us to compare between membership and separate participation, suggesting conditions under which membership dominates separate participation: interplay between the number of bidders and the degree of the stochastic dominance of valuation distributions. This allocation also provides a rationale for secret reserve prices, a long-standing puzzle in theory.

Suggested Citation

  • Seung Han Yoo, 2018. "Membership Mechanisms," Discussion Paper Series 1804, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:1804
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1804.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    mechanism design; membership; multidimensional types; auction; secret reserve prices;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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