Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions

Abstract

We consider auctions for a single indivisible object, in the case where the bidders have information about each other which is not available to the seller. We show that the seller can use this information to his own benefit, and we completely characterize the environments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder's willingness to pay. We provide this characterization for auctions in which the bidders have dominant strategies, and for those where the relevant equilibrium concept is Bayesian Nash. In both setups , the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties.

Ex-post full surplus extraction, straightforwardly

“…5 However, Proposition 3 implies directly that no bidder would pay any positive price to openly increase the precision of his signal from to any + "; for any " > 0. This result points out a fundamental di¤erence between environments E and E 0 ; due to the di¤erentiated informational content of various order statistics of the private signals.…”

“…7 Sixth, symmetry plays a narrower role than in antecedent papers. 5 Persico [2000] argues in a model containing E as a special case, that information acquisition has a positive marginal revenue. A player has an incentive to move from to + " in his precision as long as his opponent continues to bid as if the player's information precision is constant.…”

Debt Restructuring with Multiple Creditors and the Role of Exchange Offers

“…See Section 6 below for a discussion of this possibility. 8 On mechanism design when private information is correlated see Cré mer and McLean (1988). 9 For instance, debt forgiveness may be more attractive to bank creditors who are poorly capitalized and/or already have large tax credits from loss carry-forwards, because it can often be designed to avoid explicit debt write-offs.…”

Limit of the Principal’s Information

“…Riordan and Sappington [7] considered the question of when there will be ex post public information correlated with the agent's type. Cremer and McLean [8] and McAfee and Reny [9] considered the situation in which an uninformed principal faces many privately informed agents whose types are correlated.…”