Revenue-capped efficient auctions

Nozomu Muto, Yasuhiro Shirata and Takuro Yamashita
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Nozomu Muto: Yokohama National University

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Abstract: We study an auction that maximizes the expected social surplus under an upper-bound constraint on the seller's expected revenue, which we call a revenue cap. Such a constrained-efficient auction may arise, for example, when (i) the auction designer is "pro-buyer", that is, he maximizes the weighted sum of the buyers' and seller's auction payoffs, where the weight for the buyers is greater than that for the seller; (ii) the auction designer maximizes the (unweighted) total surplus in a multiunit auction in which the number of units the seller owns is private information; or (iii) multiple sellers compete to attract buyers before the auction. We characterize the mechanisms for constrained-efficient auctions and identify their important properties. First, the seller sets no reserve price and sells the good for sure. Second, with a nontrivial revenue cap, "bunching" is necessary. Finally, with a sufficiently severe revenue cap, the constrained-efficient auction has a bid cap, so that bunching occurs at least "at the top," that is, "no distortion at the top" fails.

Date: 2020-06
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Published in Journal of the European Economic Association, 2020, 18 (3), pp.1284-1320. ⟨10.1093/jeea/jvz015⟩

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Related works:
Journal Article: Revenue-Capped Efficient Auctions (2020)
Working Paper: Revenue-capped efficient auctions (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03049103

DOI: 10.1093/jeea/jvz015

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