Optimal auctions for asymmetrically budget constrained bidders

Malakhov, Alexey; Vohra, Rakesh

doi:10.1007/s10058-008-0051-x

Cited by 31 publications

(21 citation statements)

References 11 publications

(8 reference statements)

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“…It would be interesting to compute the expected revenue‐maximizing optimal mechanisms in our model. It may be noted that, Che and Gale, ;, , Malakhov and Vohra () and Pai and Vohra () have analyzed optimal mechanisms with budget constrained bidders. In these papers, the valuation (which is independent of income) is the maximum price that an agent is willing to pay but not necessarily able to pay.…”

Section: Resultsmentioning

confidence: 99%

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Basic auction theory revisited

Dastidar

2015

Int J of Economic Theory

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We revisit the benchmark model of auctions and consider a more general class of utility functions that allow for income effects. We assume that all individuals have the same utility function but have different incomes. Incomes are private information. We analyze first‐price, second‐price, and all‐pay auctions and show that non‐quasilinearity changes many basic results of the benchmark model. While Vickrey's () result on second‐price auctions is very robust, revenue equivalence breaks down even with risk‐neutral bidders, high enough incomes and identically and independently distributed types. In most cases, we find that all‐pay auctions fetch the highest expected revenue.

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Section: Resultsmentioning

confidence: 99%

“…Some interesting papers have analyzed optimal mechanisms with budget‐constrained bidders. A select sample of such papers is as follows:, Che and Gale, ;, , Malakhov and Vohra (), and Pai and Vohra () 7 . It may be noted that computation of optimal mechanisms is outside the scope of our analysis.…”

Section: Introductionmentioning

confidence: 99%

Basic auction theory revisited

Dastidar

2015

Int J of Economic Theory

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“…Laffont and Robert (1996) derive the ex post revenue‐maximizing mechanism when different buyers have the same commonly known budget. Malakhov and Vohra (2005) characterize a seller's revenue‐maximizing mechanism when two buyers have discrete values and only one buyer is budget constrained. Buyers also may have private information about their budgets (Che and Gale, 1996, 2000).…”

Section: Introductionmentioning

confidence: 99%

“…Maskin (2000) considers ex ante efficiency in the same framework. Malakhov and Vohra (2005) characterize the ex post revenue‐maximizing mechanism when two buyers have discrete valuations and only one buyer is budget constrained 30 . All these mechanisms use reserve prices, though the reserve prices are lower and less effective in extracting rent from privately informed buyers than they are in the absence of financial constraints.…”

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confidence: 99%

Strategic ex ante contracts: rent extraction and opportunity costs

Hua

2007

The RAND J of Economics

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This article cosiders the possibility that a seller can contract with one uninformed buyer prior to an auction involving two potential buyers. The seller's optimal strategic ex ante contract more accurately reflects joint opportunity costs of the seller and the contracted buyer, and therefore extracts more rent from the entrant. Moreover, this ex ante contract mitigates the seller's ex post rent seeking vis-à-vis the contracted buyer. Accordingly, it may create more social welfare than the absence of ex ante contracts, depending upon the contracted buyer's financial constraint and the distributions of trade surplus. Implementation of the optimal strategic ex ante contract and policy implications are discussed.

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“…Armstrong (1996), Rochet and Choné (1998) (2000) and Malakhov and Vohra (2005) for static models with budget constrained buyers.…”

Section: Related Literaturementioning

confidence: 99%

Optimal dynamic mechanism design with deadlines

Mierendorff

2016

Journal of Economic Theory

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Abstract. A dynamic mechanism design problem with multi-dimensional private information is studied. There is one object and two buyers who arrive in two different periods. In addition to his privately known valuation, the first buyer also has a privately known deadline for purchasing the object. The seller wants to maximize revenue.Depending on the type distribution, the incentive compatibility constraint for the deadline may or may not be binding in the optimal mechanism. Sufficient conditions on the type distribution and examples are given for either case.An optimal mechanism for the binding case is derived. It can be implemented by a fixed price in period one and an asymmetric auction in period two. The asymmetry prevails even if the valuations of both buyers are identically distributed. In order to prevent buyer one from buying in the first period when his deadline is two, the seller sets a reserve price that is lower than in the classical (Myerson, 1981) optimal auction and gives him a (non-linear) bonus. The bonus leads to robust bunching at the top of the type-space. The optimal mechanism can be characterized in terms of generalized virtual valuations which depend endogenously on the allocation rule.

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Optimal auctions for asymmetrically budget constrained bidders

Abstract: Dominant strategy, Shortest path, Network, C61, C70, D44,

Cited by 31 publications

References 11 publications

Basic auction theory revisited

Basic auction theory revisited

Strategic ex ante contracts: rent extraction and opportunity costs

Optimal dynamic mechanism design with deadlines

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