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Optimal Auction Design Under Non-Commitment

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  • Vasiliki Skreta

Abstract

We characterize revenue-maximizing mechanisms in Myerson's (1981) environment when the seller behaves sequentially rationally, in the sense that she cannot commit not to propose a new mechanism if the previously chosen one fails to allocate the object. We show that the seller-optimal mechanism takes the same form as in the case when there is commitment: The seller maximizes revenue by assigning, at t=1, the good to the buyer with the highest virtual valuation if it is above a buyer-specific reserve price. If no trade takes place at t=1, at t=2, the seller assigns the object to the buyer with the highest posterior virtual valuation, provided that it is above the seller's value.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

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  • Vasiliki Skreta, 2008. "Optimal Auction Design Under Non-Commitment," Working Papers 08-14, New York University, Leonard N. Stern School of Business, Department of Economics.
    • Handle: RePEc:ste:nystbu:08-14
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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