Faculty Digital Archive

Archive@NYU >
Stern School of Business >
Economics Working Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26021

Title: The Role of Outside Options in Auction Design
Authors: Skreta, Vasiliki
Figueroa, Nicolas
Keywords: Optimal Multi Unit Auctions
Type Dependent Outside Options
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

Files in This Item:

File Description SizeFormat
8-12 out_long.pdf476.58 kBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.


The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS