Informationally Robust Optimal Auction Design

Dirk Bergemann, Benjamin Brooks and Stephen Morris

No 2065, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: A single unit of a good is to be sold by auction to one of two buyers. The good has either a high value or a low value, with known prior probabilities. The designer of the auction knows the prior over values but is uncertain about the correct model of the buyers� beliefs. The designer evaluates a given auction design by the lowest expected revenue that would be generated across all models of buyers� information that are consistent with the common prior and across all Bayesian equilibria. An optimal auction for such a seller is constructed, as is a worst-case model of buyers� information. The theory generates upper bounds on the seller�s optimal payoff for general many-player and common-value models.

Keywords: Optimal auctions; common values; information structure; model uncertainty; ambiguity aversion; robustness; Bayes correlated equilibrium; revenue maximization; revenue equivalence; information rent (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 D83 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-12
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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