Optimal nondiscriminatory auctions with favoritism
Federico Weinschelbaum (),
Leandro Arozamena () and
Nicholas Shunda ()
No 110, Working Papers from Universidad de San Andres, Departamento de Economia
In many auction settings, there is favoritism: the seller's welfare depends positively on the utility of a subset of potential bidders. However, laws or regulations may not allow the seller to discriminate among bidders. We find the optimal nondiscriminatory auction in a private value, single-unit model under favoritism. At the optimal auction there is a reserve price, or an entry fee, which is decreasing in the proportion of preferred bidders and in the intensity of the preference. Otherwise, the highest-valuation bidder wins. We show that, at least under some conditions, imposing a no-discrimination constraint raises expected seller revenue.
Keywords: auctions; favoritism; nondiscriminatorymechanisms (search for similar items in EconPapers)
JEL-codes: C72 D44 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012-03, Revised 2012-03
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
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https://webacademicos.udesa.edu.ar/pub/econ/doc110.pdf First version, 2012 (application/pdf)
Journal Article: Optimal nondiscriminatory auctions with favoritism (2014)
Working Paper: Optimal nondiscriminatory auctions with favoritism (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:sad:wpaper:110
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