Theory and Decision

, Volume 75, Issue 3, pp 359–387

Optimal allocation mechanisms with type-dependent negative externalities


    • Department of EconomicsUniversity of Southern California
    • CEPR

DOI: 10.1007/s11238-012-9345-0

Cite this article as:
Brocas, I. Theory Decis (2013) 75: 359. doi:10.1007/s11238-012-9345-0


I analyze optimal auction design in the presence of linear type-dependent negative externalities. I characterize the properties of the optimal mechanism when externalities are “strongly decreasing” and “increasing” in the agent’s valuation and I discuss its implementation with sealed-bid auctions. Interestingly, bidding strategies are not necessarily increasing in valuations, and the optimal mechanism can be implemented by setting a price ceiling instead of a reserve price.


AuctionsType-dependent externalitiesMechanism design

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© Springer Science+Business Media New York 2012