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Optimal auction design under non-commitment

Skreta, V; (2015) Optimal auction design under non-commitment. Journal of Economic Theory , 159 (B) pp. 854-890. 10.1016/j.jet.2015.04.007. Green open access

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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.

Type: Article
Title: Optimal auction design under non-commitment
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jet.2015.04.007
Publisher version: https://doi.org/10.1016/j.jet.2015.04.007
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Mechanism design, Optimal auctions, Limited commitment
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10092296
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