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- Title
AN EFFICIENT AUCTION.
- Authors
Perry, Motty; Reny, Philip J.
- Abstract
The article presents information on different kind of auctions. In a pure private values setting, Vickrey's celebrated multi-unit auction achieves an (ex-post) efficient outcome. However, in the interdependent values case, when each bidder's private information affects the (ex-post) values of the others, the efficiency of Vickrey's auction can fail. General interest lies in modifying Vickrey's auction so that efficiency does obtain even when the bidders' values are interdependent, while maintaining Vickrey's assumptions that the goods for sale are homogeneous and that each bidder's demand is downward sloping. Allowing interdependent values, they show that a revenue-maximizing seller can extract the full surplus from bidders whose private information is correlated. Now, while full surplus extraction requires correlation, a careful reading of CM's main result reveals that the direct mechanism they construct implements an efficient outcome, whether or not the bidders' private information is correlated.
- Subjects
AUCTIONS; BAILMENTS; COMMERCIAL law; BIDDERS; PUBLIC finance; LETTING of contracts
- Publication
Econometrica, 2002, Vol 70, Issue 3, p1199
- ISSN
0012-9682
- Publication type
Article
- DOI
10.1111/1468-0262.00322