A Theory of Auctions with Endogenous Valuations (joint with B.Moldovanu and P. Strack)

Elath Hall, 2nd floor, Feldman Building, Edmond J. Safra Campus
Sunday, April 28, 2019 - 13:30 to 16:00
Alex Gershkov

Abstract: We derive the symmetric, revenue maximizing allocation of m units among n symmetric agents who have unit demand, and who take costly actions that influence their values before participating in the mechanism. The auction with costly actions can be represented by a reduced form model where agents have convex, non-expected utility preferences over the interim probability of receiving an object. Both the uniform m + 1 price auction and the discriminatory pay-your-bid auction with reserve prices constitute symmetric revenue maximizing mechanisms. Contrasting the case with exogenous valuations, 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.