Countervailing incentives in allocation mechanisms with type-dependent externalities |
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| Institution: | 1. Universidad de Vigo, RGEA-ECOBAS, Spain;2. Universidad de Salamanca, IME, Spain;1. Department of Economics, University of Cologne, Albertus-Magnus Platz, D-50923 Cologne, Germany;2. Vienna Graduate School of Finance and Institute for Advanced Studies, A-1080 Vienna, Austria;1. Economic Research Unit, Indian Statistical Institute, 203 Barackpore Trunk Road, 700108 Kolkata, India;2. Dipartimento di Scienze Economiche e Statistiche and CSEF, University of Napoli Federico II, Complesso Monte S. Angelo, Via Cintia, Napoli 80126, Italy;1. CNRS (LEM, UMR 8179), France;2. Iéseg School of Management, 3 rue de la Digue, 59000 Lille, France;3. CORE (Université Catholique de Louvain), 34 voie du Roman Pays, 1348 Louvain-la-Neuve, Belgium;4. EM Lyon Business School, 23 avenue Guy de Collongue, 69134 Ecully Cedex, France;1. GAINS, Université du Mans, Avenue Olivier Messiaen, 72085 Le Mans Cedex 9, France;2. CREM, Université de Caen, Campus 1, Esplanade de la Paix, 14032 Caen Cedex 5, France;1. Laboratoire de Probabilités et Modèles Aléatoires (LPMA), Université Pierre et Marie Curie - Paris 6, Paris, France;2. Laboratoire de Mathématiques et Modélisation d’Évry (LaMME), Université d’Evry-Val d’Essonne, UMR CNRS 8071, 91025 Évry Cedex, France;3. Institut de Science Financière et d’Assurances (ISFA), Université Claude Bernard - Lyon 1, 50 Avenue Tony Garnier, 69007 Lyon, France;4. Beijing International Center for Mathematical Research (BICMR), Peking University, 100871 Beijing, China |
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| Abstract: | I study an allocation mechanism of a single item in the presence of type-dependent externalities between bidders. The type-dependency introduces countervailing incentives and the allocation sometimes requires that types in an interior subset obtain their reservation utility. Furthermore, truth-telling requires the ex-ante allocation to satisfy a non-trivial monotonicity condition. I show that this problem is technically different from the one analyzed in related single agent settings. I provide a procedure to identify the main properties of the ex-post allocation. Typically, the solution does not entail a single reserve price. More specifically, each agent faces an allocation rule contingent on whether his and his rival’s types fall below, in or above the (endogenously determined) subset of types that obtain their reservation utility. |
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| Keywords: | Auctions Type-dependent externalities Countervailing incentives Mechanism design |
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