Optimal Multi-Object Auctions with Risk Averse Buyers
Cagri Kumru () and
MPRA Paper from University Library of Munich, Germany
We analyze the optimal auction of multiple non-identical objects when buyers are risk averse. We show that the auction formats that yield the maximum revenue in the risk neutral case are no longer optimal. In particular, selling the goods independently does not maximize the seller's revenue. We observe that seller's incentive for bundling arises solely due to the risk aversion of the buyers. The optimal auction which remains weakly efficient has the following properties: The seller perfectly insures all buyers against the risk of losing the object(s) for which they have high valuation. While the buyers who have high valuation for both objects are compensated if they do not win either object, the buyers who have low valuation for both objects incur a positive payment to the seller in the same event.
Keywords: Multi-object Auctions; Optimal Auctions; Multi-dimensional Screening; Risk Averse Buyers; Bundling (search for similar items in EconPapers)
JEL-codes: D44 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-gth and nep-upt
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