Ex-post full surplus extraction,straightforwardly |
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Authors: | Vlad Mares Ronald M Harstad |
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Institution: | (1) Olin School of Business, Washington University in St. Louis, 1 Brookings Drive, St. Louis, MO 63130-4899, USA;(2) Economics Department, University of Missouri, Columbia, MO 65211-6040, USA |
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Abstract: | 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 sufficient 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.
Harstad acknowledges hospitable accommodation by the Fuqua School of Business, Duke University, and the Olin School of Business,
Washington University in St. Louis, during parts of this research. We are grateful for comments and suggestions from Richard
McLean and Jeroen Swinkels. |
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Keywords: | Common-value auctions Full surplus extraction Ex-post individual rationality Mechanism design |
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