Title

Optimal Auction Design in a Common Value Model

Author(s)

Dirk Bergemann Dirk Bergemann (Yale University)

Benjamin Brooks Benjamin Brooks (University of Chicago)

Stephen Morris Stephen Morris (Princeton University)

Abstract

We study auction design when bidders have a pure common value equal to the maximum of their independent signals. In the revenue maximizing mechanism, each bidder makes a payment that is independent of his signal and the allocation discriminates in favor of bidders with lower signals. We provide a necessary and sufficient condition under which the optimal mechanism reduces to a posted price under which all bidders are equally likely to get the good. This model of pure common values can equivalently be interpreted as model of resale: the bidders have independent private values at the auction stage, and the winner of the auction can make a take-it-or-leave-it-offer in the secondary market under complete information.

Creation Date

2016-12

Section URL ID

Paper Number

085_2016

URL

http://cowles.yale.edu/sites/default/files/files/pub/d20/d2064.pdf

File Function

Jel

C720, D440, D820, D830

Keyword(s)

Suppress

false

Series

10