—Optimal Mechanism for Selling a Set of Commonly Ranked Objects

Juan Feng ()
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Juan Feng: Warrington College of Business Administration, University of Florida, Gainesville, Florida

Marketing Science, 2008, vol. 27, issue 3, 501-512

Abstract: This paper designs an optimal mechanism for selling a set of commonly ranked objects. Although buyers rank these objects in the same order, the rates at which their valuations change for a less-preferred object might be different. Four stylized cases are identified according to this difference: parallel, convergent, divergent, and convergent-then-divergent. In general, the optimal mechanism cannot be interpreted as a conventional second-price auction. A reserve price is imposed for each object. Depending on which of the four stylized cases is considered, a higher-value bidder may be allocated a higher-ranked or lower-ranked object. There is also a positive probability that a higher-ranked object is not allocated while a lower-ranked one allocated. In a departure from the extant mechanism-design literature, the individual-rationality constraint for a mid-range type of bidder can be binding.

Keywords: Slot allocation; optimal mechanism; common ranking; auction (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:27:y:2008:i:3:p:501-512

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