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Optimal Auction Design Under Non-Commitment

  • Vasiliki Skreta

We characterize revenue-maximizing mechanisms in Myerson's (1981) environment when the seller behaves sequentially rationally, in the sense that she cannot commit not to propose a new mechanism if the previously chosen one fails to allocate the object. We show that the seller-optimal mechanism takes the same form as in the case when there is commitment: The seller maximizes revenue by assigning, at t=1, the good to the buyer with the highest virtual valuation if it is above a buyer-specific reserve price. If no trade takes place at t=1, at t=2, the seller assigns the object to the buyer with the highest posterior virtual valuation, provided that it is above the seller's value.

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File URL: http://w4.stern.nyu.edu/emplibrary/8-14%20NC.pdf
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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 08-14.

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Date of creation: 2008
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Handle: RePEc:ste:nystbu:08-14
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New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126

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Web page: http://w4.stern.nyu.edu/economics/

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