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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26021
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| Title: | The Role of Outside Options in Auction Design |
| Authors: | Skreta, Vasiliki
Figueroa, Nicolas |
| Keywords: | Optimal Multi Unit Auctions
Type Dependent Outside Options
Externalities
Mechanism Design |
| Issue Date: | Sep-2007 |
| Series/Report no.: | EC-08-12 |
| Abstract: | This paper studies revenue maximizing auctions when
buyersíoutside options depend on their private information. The
set-up is very general and encompasses a large number of potential
applications. The main novel message of our analysis is that with
type-dependent non-participation payo§s, the revenue maximizing
assignment of objects can crucially depend on the outside options that
buyers face. Outside options can therefore a§ect the degree of
e¢ ciency of revenue maximizing auctions. We show that depending on
the shape of outside options, sometimes an optimal mechanism will
allocate the objects in an ex-post e¢ cient way, and other times,
buyers will obtain objects more often than it is e¢ cient. Our
characterization rings a bell of caution. Modeling
buyersíoutside options as being independent of their private
information, is with loss of generality and can lead to quite misleading
intuitions. Our solution procedure can be useful also in other models
where type-dependent outside options arise endogenously, because, for
instance, buyers can collude or because there are competing sellers. |
| URI: | http://hdl.handle.net/2451/26021 |
| Appears in Collections: | Economics Working Papers
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