Optimal selling mechanisms under moment conditions

Vinicius Carrasco, Vitor Farinha Luz, Nenad Kos, Matthias Messner, Paulo Monteiro and Humberto Moreira

Journal of Economic Theory, 2018, vol. 177, issue C, 245-279

Abstract: We study the revenue maximization problem of a seller who is partially informed about the distribution of buyer's valuations, only knowing its first N moments. The seller chooses the mechanism generating the best revenue guarantee based on the information available, that is, the optimal mechanism is chosen according to maxmin expected revenue. We show that the transfer function in the optimal mechanism is given by non-negative monotonic hull of a polynomial of degree N. This enables us to transform the seller's problem into a much simpler optimization problem over N variables. The optimal mechanism is found by choosing the coefficients of the polynomial subject to a resource constraint. We show that knowledge of the first moment does not guarantee strictly positive revenue for the seller, characterize the solution for the cases of two moments and derive some characteristics of the solution for the general case.

Keywords: Optimal mechanism design; Robustness; Incentive compatibility; Individual rationality; Ambiguity aversion; Moment conditions (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:177:y:2018:i:c:p:245-279

DOI: 10.1016/j.jet.2018.05.005

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