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Title: Optimal auctions with asymmetric financial externalities
Authors: Lu, J. 
Keywords: Auction design
Charity auction
Cross shareholdings
Effective payments
Financial externalities
Payment-coefficient matrix
Issue Date: Mar-2012
Citation: Lu, J. (2012-03). Optimal auctions with asymmetric financial externalities. Games and Economic Behavior 74 (2) : 561-575. ScholarBank@NUS Repository.
Abstract: This paper studies optimal auction design with asymmetric linear financial externalities among bidders. When the matrix γ that relates bidders' payoffs to their payments is nonsingular, the payment-related component in the design objective must equal a unique linear combination of its counterparts in bidder's payoffs. If all multipliers of the linear combination are nonnegative, a modified Myerson procedure is discovered for deriving the optimal design. If any multiplier is negative, an arbitrarily high value can be achieved for design objective by setting proper fixed transfers to bidders. When the matrix γ is singular, the unbounded optimum result typically prevails. We applied our method to auctions with cross shareholdings and charity auctions for revenue-maximizing and efficient designs. © 2011 Elsevier Inc.
Source Title: Games and Economic Behavior
ISSN: 08998256
DOI: 10.1016/j.geb.2011.08.013
Appears in Collections:Staff Publications

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