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Ex-Post Full Surplus Extraction, Straightforwardly

Consider an estimate of the common value of an auctioned asset that is symmetric in the bidders' types. Such an estimate can be represented solely in terms of the order statistics of those types. This representation forms the basis for a pricing rule yielding truthful bidding as an equilibrium, whether bidders'types are affiliated or independent. We highlight the link between the estimator and full surplus extraction, providing a necessary and suffient condition for ex-post full surplus extraction, including the possibility of independent types. The results offer sharp insights into the strengths and limits of simple auctions by identifying the source of informational rents in such environments.

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File URL: http://economics.missouri.edu/working-papers/2005/wp0515_harstad.pdf
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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0515.

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Length: 16 pgs.
Date of creation: 02 Nov 2005
Date of revision:
Publication status: Published in Economic Theory 2007
Handle: RePEc:umc:wpaper:0515
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Web page: http://economics.missouri.edu/
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  1. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October.
  2. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics.
  3. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  4. Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0504, Department of Economics, University of Missouri.
  5. Bulow, Jeremy I. & Klemperer, Paul, 1994. "Auctions vs. Negotiations," CEPR Discussion Papers 924, C.E.P.R. Discussion Papers.
  6. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
  7. McAfee, R Preston & McMillan, John & Reny, Philip J, 1989. "Extracting the Surplus in the Common-Value Auction," Econometrica, Econometric Society, vol. 57(6), pages 1451-59, November.
  8. Colin Campbell & Dan Levin, 2006. "When and why not to auction," Economic Theory, Springer, vol. 27(3), pages 583-596, 04.
  9. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  10. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Levin, Dan & Harstad, Ronald M., 1986. "Symmetric bidding in second-price, common-value auctions," Economics Letters, Elsevier, vol. 20(4), pages 315-319.
  12. 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.
  13. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November.
  14. Matthews, Steven A., 1983. "Selling to risk averse buyers with unobservable tastes," Journal of Economic Theory, Elsevier, vol. 30(2), pages 370-400, August.
  15. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
  16. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
  17. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
  18. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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