Working Paper: CEPR ID: DP13259
Authors: Benny Moldovanu
Abstract: We study the revenue maximizing allocation of m units among n symmetric agentsthat have unit demand and convex preferences over the probability of receiving anobject. Such preferences are naturally induced by a game where the agents take costlyactions that a ect their values before participating in the mechanism. Both the uni-form m + 1 price auction and the discriminatory pay-your-bid auction with reserveprices constitute symmetric revenue maximizing mechanisms. Contrasting the casewith linear preferences, the optimal reserve price reacts to both demand and supply,i.e., it depends both on the number of objects m and on number of agents n. The maintool in our analysis is an integral inequality involving majorization, super-modularityand convexity due to Fan and Lorentz (1954).
Keywords: Auctions; Endogenous Valuations; Revenue Maximization
JEL Codes: D44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| number of objects (m) (C39) | optimal reserve price (D44) |
| number of agents (n) (L85) | optimal reserve price (D44) |
| agents' investments (G11) | valuations (D46) |
| valuations (D46) | auction outcomes (D44) |
| number of agents (n) (L85) | optimal cutoff type (C24) |
| number of objects (m) (C39) | optimal cutoff type (C24) |
| convex preferences (D11) | bidding equilibria (D44) |