Optimal combinatorial mechanism design |
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Authors: | Levent Ülkü |
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Institution: | 1. CIE and Department of Economics, ITAM, Av. Santa Teresa 930, Colonia Heroes de Padierna, Delegacion Magdalena Contreras, 10700, Mexico, D.F., Mexico
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Abstract: | We consider an optimal mechanism design problem with several heterogenous objects and interdependent values. We characterize ex post incentives using an appropriate monotonicity condition and reformulate the problem in such a way that the choice of an allocation rule can be separated from the choice of the payment rule. Central to the analysis is the formulation of a regularity condition, which gives a recipe for the optimal mechanism. If the problem is regular, then an optimal mechanism can be obtained by solving a combinatorial allocation problem in which objects are allocated in a way to maximize the sum of virtual valuations. We identify conditions that imply regularity using the techniques of supermodular optimization. |
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