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Optimal allocation mechanisms with type-dependent negative externalities

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Abstract

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.

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Authors and Affiliations

  1. Department of Economics, University of Southern California, 3620 S. Vermont Ave., Los Angeles, CA, 90089-0253, USA

    Isabelle Brocas

  2. CEPR, London, UK

    Isabelle Brocas

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  1. Isabelle Brocas
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Correspondence to Isabelle Brocas.

Additional information

This paper builds on two cases analyzed in Brocas (2001–2009).

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Brocas, I. Optimal allocation mechanisms with type-dependent negative externalities. Theory Decis 75, 359–387 (2013). https://doi.org/10.1007/s11238-012-9345-0

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  • DOI: https://doi.org/10.1007/s11238-012-9345-0

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