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Optimal Design for an Informed Auctioneer

Seung Han Yoo ()

No 1702, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: This paper studies the role of an informed third-party in competition. While a considerable number of purchasing managers are buying things for organizations, no standard mechanism provides a satisfactory rationale for them. Each seller¡¯s quality, not associated with a contractible action, making a contract incomplete in this model, a principal seeks a better-informed auctioneer to tackle the problem. To induce the auctioneer¡¯s truthful quality reports for multiple sellers, the principal constructs the first-order absolute alignment that is aligned with a benchmark¡¯s reserve price. The optimal compensation for the auctioneer highlights a new role for reserve prices as a revelation device. In addition, we design a practical auction format to implement the optimal mechanism. Finally, this mechanism is applied to asymmetric seller auctions to relax the long-lasting assumption: common knowledge of asymmetric distributions.

Keywords: First-order absolute alignment; Auction; Revelation device (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta
Date: 2017
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