Optimal nondiscriminatory auctions with favoritism
In many auction settings, there is favoritism: the seller´s welfare depends positively on the utility of a subset of potential bidders. However, laws or regulations may not allow the seller to discriminate among bidders. We find the optimal nondiscriminatory auction in a private value, single-unit m...
| Authors: | , , |
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| Format: | article |
| Status: | Published version |
| Publication Date: | 2014 |
| Country: | Argentina |
| Institution: | Consejo Nacional de Investigaciones Científicas y Técnicas |
| Repository: | CONICET Digital (CONICET) |
| Language: | English |
| OAI Identifier: | oai:ri.conicet.gov.ar:11336/35578 |
| Online Access: | http://hdl.handle.net/11336/35578 |
| Access Level: | Open access |
| Keyword: | Auctions Favoritism Nondiscriminatory Mechanisms https://purl.org/becyt/ford/5.2 https://purl.org/becyt/ford/5 |
| Summary: | In many auction settings, there is favoritism: the seller´s welfare depends positively on the utility of a subset of potential bidders. However, laws or regulations may not allow the seller to discriminate among bidders. We find the optimal nondiscriminatory auction in a private value, single-unit model under favoritism. At the optimal auction there is a reserve price, or an entry fee, which is decreasing in the proportion of preferred bidders and in the intensity of the preference. Otherwise, the highest-valuation bidder wins. We show that, at least under some conditions, imposing a no-discrimination constraint raises expected seller revenue. |
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