Optimal Design for an Informed Auctioneer
Seung Han Yoo ()
No 1702, Discussion Paper Series from Institute of Economic Research, Korea University
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)
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Persistent link: https://EconPapers.repec.org/RePEc:iek:wpaper:1702
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