A Robustly Efficient Auction

Kyungmin Kim and Antonio Penta ()

No 248, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: We study the problem of efficient auction design in environments with interdependent values, under arbitrary common knowledge assumptions. We propose a simple mechanism and show that, under a rather mild condition, it "robustly" achieves efficiency. Our mechanism consists in a standard Vickrey auction, preceded by one round of communication, where agents report their private signals and receive transfers from the designer. We interpret the transfers as the cost for the designer to robustly achieve efficiency. We introduce a notion of robust informational size and show that the transfers are small if agents are informationally small in our sense. Furthermore, the transfers are decreasing in the amount of information available to the designer and in the strength of the common knowledge assumptions. In other words, the more robust the efficient implementation result, the higher the cost of achieving efficiency. We thus formalize the intuitive idea of a trade-off between robustness and efficient implementation and analyze the determinants of the "cost of robustness".

Keywords: Cost of robustness; efficient auctions; informational size; interdependent values; robust mechanism design (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:248

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