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Optimal two-object auctions with synergies

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  • Domenico Menicucci

Abstract

We design the revenue-maximizing auction for two goods when each buyer has bi-dimensional private information and a superadditive utility function (i.e., a synergy is generated if a buyer wins both goods). In this setting the seller is likely to allocate the goods inefficiently with respect to an environ-ment with no synergies. In particular, if the synergy is large then it may occur that a buyer’s valuations for the goods weakly dominate the valuations of another buyer and the latter one receives the bundle. We link this fact, which contrasts with the results for a setting without synergies, to "non-regular" one-good models.

Suggested Citation

  • Domenico Menicucci, 2001. "Optimal two-object auctions with synergies," ICER Working Papers - Applied Mathematics Series 18-2001, ICER - International Centre for Economic Research.
    • Handle: RePEc:icr:wpmath:18-2001
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    More about this item

    Keywords

    Multiple-unit Auctions; Multi-dimensional Screening; Bundling;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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