Revenue-Capped Efficient Auctions. Issue 3 (23rd April 2019)

• Record Type: Journal Article
• Authors: Muto, Nozomu; Shirata, Yasuhiro; Yamashita, Takuro
• Is Part Of: Journal of the European Economic Association. Volume 18:Issue 3(2020)
• Page Start: 1284
• Page End: 1320
• Publication Date: 2019-04-23
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; Science économique; Périodique électronique (Descripteur de forme); Ressource Internet (Descripteur de forme); 330
• DOI: 10.1093/jeea/jvz015
• Languages: English
• ISSNs: 1542-4766

Abstract

Abstract: We study an auction that maximizes the expected social surplus under an upper-bound constraint on the seller's expected revenue, which we call a revenue cap . Such a constrained-efficient auction may arise, for example, when (i) the auction designer is "pro-buyer", that is, he maximizes the weighted sum of the buyers' and seller's auction payoffs, where the weight for the buyers is greater than that for the seller; (ii) the auction designer maximizes the (unweighted) total surplus in a multiunit auction in which the number of units the seller owns is private information; or (iii) multiple sellers compete to attract buyers before the auction. We characterize the mechanisms for constrained-efficient auctions and identify their important properties. First, the seller sets no reserve price and sells the good for sure. Second, with a nontrivial revenue cap, "bunching" is necessary. Finally, with a sufficiently severe revenue cap, the constrained-efficient auction has a bid cap, so that bunching occurs at least "at the top, " that is, "no distortion at the top" fails.