Theory and Decision

, Volume 75, Issue 3, pp 359–387 | Cite as

Optimal allocation mechanisms with type-dependent negative externalities

Article

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.

Keywords

Auctions Type-dependent externalities Mechanism design 

JEL Classification

D44 D62 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Southern CaliforniaLos AngelesUSA
  2. 2.CEPRLondonUK

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