A theory of auctions with endogenous valuations
A theory of auctions with endogenous valuations
We derive the symmetric, revenue-maximizing allocation of several units among agents who take costly actions that influence their values. The problem is equivalent to a reduced-form model where agents have nonexpected utility. The uniform-price auction and the discriminatory pay-your-bid auction with reserve prices that react to both demand and supply constitute symmetric, optimal mechanisms. We also identify a condition under which the overall optimal mechanism is indeed symmetric and illustrate the structure of the optimal asymmetric mechanism when the condition fails. The main tool in our analysis is an integral inequality based on Fan and Lorentz (1954).
1011-1051
Gershkov, Alex
214a0b5e-c742-486d-b910-c8ec702c943a
Moldovanu, Benny
f84fdd42-3143-4219-be24-fb26385b106d
Strack, Philipp
35074b36-f2b6-439e-bc94-8f469f83d474
Zhang, Mengxi
862887d0-ad62-42e3-bf3d-6b82a872347c
1 April 2021
Gershkov, Alex
214a0b5e-c742-486d-b910-c8ec702c943a
Moldovanu, Benny
f84fdd42-3143-4219-be24-fb26385b106d
Strack, Philipp
35074b36-f2b6-439e-bc94-8f469f83d474
Zhang, Mengxi
862887d0-ad62-42e3-bf3d-6b82a872347c
Gershkov, Alex, Moldovanu, Benny, Strack, Philipp and Zhang, Mengxi
(2021)
A theory of auctions with endogenous valuations.
Journal of Political Economy, 129 (4), .
(doi:10.1086/712735).
Abstract
We derive the symmetric, revenue-maximizing allocation of several units among agents who take costly actions that influence their values. The problem is equivalent to a reduced-form model where agents have nonexpected utility. The uniform-price auction and the discriminatory pay-your-bid auction with reserve prices that react to both demand and supply constitute symmetric, optimal mechanisms. We also identify a condition under which the overall optimal mechanism is indeed symmetric and illustrate the structure of the optimal asymmetric mechanism when the condition fails. The main tool in our analysis is an integral inequality based on Fan and Lorentz (1954).
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Published date: 1 April 2021
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Local EPrints ID: 503776
URI: http://eprints.soton.ac.uk/id/eprint/503776
ISSN: 0022-3808
PURE UUID: 6f5ad13d-63f7-4125-b1c7-09d087d2dd00
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Date deposited: 12 Aug 2025 17:14
Last modified: 13 Aug 2025 03:04
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Author:
Alex Gershkov
Author:
Benny Moldovanu
Author:
Philipp Strack
Author:
Mengxi Zhang
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