Economic Theory

, Volume 39, Issue 1, pp 113–128 | Cite as

An optimal auction for capacity constrained bidders: a network perspective

  • Alexey Malakhov
  • Rakesh V. Vohra
Research Article


This paper examines the problem of a seller with limited supply selling to a group of agents whose private information is two-dimensional. Each agent has a constant marginal value for the good up to some capacity, thereafter it is zero. Both the marginal value and the capacity are private information. We describe the revenue maximizing Bayesian incentive compatible auction for this environment. A novel feature of the analysis is an interpretation of an optimal auction design problem in terms of a linear program that is an instance of a parametric shortest path problem on a lattice.


Auctions Networks Linear programming 

JEL Classification

C61 C70 D44 


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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Sam M. Walton College of BusinessUniversity of ArkansasFayettevilleUSA
  2. 2.Kellogg School of ManagementNorthwestern UniversityEvanstonUSA

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