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Approximation in mechanism design with interdependent values

Yunan Li

Games and Economic Behavior, 2017, vol. 103, issue C, 225-253

Abstract: This paper studies the revenue maximization problem in environments wherein buyers have interdependent values and correlated types. We show that (1) when the system of feasible sets is a matroid and buyer valuations satisfy a single-crossing condition, the generalized Vickrey–Clarke–Groves mechanisms with lazy reserves (VCG-L) are ex-post incentive compatible and ex-post individually rational; (2) if, in addition, the valuation distribution satisfies a generalized monotone hazard rate condition, the VCG-L mechanism with conditional monopoly reserves is approximately optimal. Then we construct an ascending auction that implements the truth-telling equilibrium of a VCG-L mechanism in ex-post equilibrium. Finally, we discuss the connection between the VCG-L mechanisms and greedy algorithms studied in Lehmann et al. (2002) and deferred-acceptance auctions studied in Milgrom and Segal (2014), and the impact of competition by proving a Bulow and Klemperer (1996) type result.

Keywords: Mechanism design; Approximation; Interdependent values; Revenue maximization (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2017
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