Document Type
Discussion Paper
Publication Date
12-1-2016
CFDP Number
2064
CFDP Pages
34
Abstract
We study auction design when bidders have a pure common value equal to the maximum of their independent signals. In the revenue maximizing mechanism, each bidder makes a payment that is independent of his signal and the allocation discriminates in favor of bidders with lower signals. We provide a necessary and sufficient condition under which the optimal mechanism reduces to a posted price under which all bidders are equally likely to get the good. This model of pure common values can equivalently be interpreted as model of resale: the bidders have independent private values at the auction stage, and the winner of the auction can make a take-it-or-leave-it-offer in the secondary market under complete information.
Recommended Citation
Bergemann, Dirk; Brooks, Benjamin; and Morris, Stephen, "Optimal Auction Design in a Common Value Model" (2016). Cowles Foundation Discussion Papers. 2526.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2526