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Mechanism Design with Interdependent Valuations: Surplus Extraction

  • Claudio Mezzetti

    ()

If valuations are interdependent and agents observe their own allocation payoffs, then two-stage revelation mechanisms expand the set of implementable decision functions. In a two-stage revelation mechanism agents report twice. In the first stage - before the allocation is decided - they report their private signals. In the second stage - after the allocation has been made, but before final transfers are decided - they report their payoffs from the allocation. Conditions are provided under which an uninformed seller can extract (or virtually extract) the full surplus from a sale to privately informed buyers, in spite of the buyers’ signals being independent random variables.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp05-1.pdf
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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 05/1.

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Date of creation: Feb 2005
Date of revision: Mar 2006
Handle: RePEc:lec:leecon:05/1
Contact details of provider: Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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  1. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  2. Myerson, Roger B, 1986. "Multistage Games with Communication," Econometrica, Econometric Society, vol. 54(2), pages 323-58, March.
  3. Claudio Mezzetti, 2004. "Mechanism Design with Interdependent Valuations: Efficiency," Econometrica, Econometric Society, vol. 72(5), pages 1617-1626, 09.
  4. Moez Bennouri & Sonia Falconieri, 2006. "Optimal auctions with asymmetrically informed bidders," Economic Theory, Springer, vol. 28(3), pages 585-602, 08.
  5. Richard McLean & Andrew Postlewaite, 2004. "Informational Size and Efficient Auctions," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 809-827.
  6. Gresik, Thomas A., 1991. "Ex ante incentive efficient trading mechanisms without the private valuation restriction," Journal of Economic Theory, Elsevier, vol. 55(1), pages 41-63, October.
  7. Steven R. Williams & Georgia Kosmopoulou, 1998. "The robustness of the independent private value model in Bayesian mechanism design," Economic Theory, Springer, vol. 12(2), pages 393-421.
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