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Optimal auctions with multidimensional types and the desirability of exclusion

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  • Page Junior, Frank H.
  • Monteiro, P. K.
  • Svaiter, Benar Fux

Abstract

Within the context of a single-unit, independent private values auction model, we show that if bidder types are multidimensional, then under the optimal auction exclusion of some bidder types will occur. A second contribution of the paper is methodological in nature. In particular, we identify conditions under which an auction model with multidimensional types can be reduced to a model with one dimensional types without loss of generality. Reduction results of this type have achieved the status of folklore in the mechanism design literature. Here, we provide a proof of the reduction result for auctions.

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  • Page Junior, Frank H. & Monteiro, P. K. & Svaiter, Benar Fux, 2004. "Optimal auctions with multidimensional types and the desirability of exclusion," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 537, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:537
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    References listed on IDEAS

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    1. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-1090, October.
    3. Monteiro, Paulo Klinger & Svaiter, Benar Fux, 2010. "Optimal auction with a general distribution: Virtual valuation without densities," Journal of Mathematical Economics, Elsevier, vol. 46(1), pages 21-31, January.
    4. Paulo Barelli & Suren Basov & Mauricio Bugarin & Ian King, 2012. "The Robustness of Exclusion in Multi-dimensional Screening," RCER Working Papers 576, University of Rochester - Center for Economic Research (RCER).
    5. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
    6. Paulo Monteiro, 2009. "Abstract types and distributions in independent private value auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(3), pages 497-507, September.
    7. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Cited by:

    1. Flôres Junior, Renato Galvão, 2004. "On the use (fulness) of CGE modelling in trade negotiations and policy," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 564, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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