Auction Theory, 2nd Edition

Chapter | Ten

Mechanism Design with

Interdependent Values

In the preceding chapters we considered the relative performance of three

common formats—the first-price, second-price, and English auctions—in a set-

ting with interdependent values and affiliated signals. Here, as in Chapter 5, we

study abstract selling mechanisms with a view to comparing the performance

of the common auction forms to that of the “ideal” method of selling a single

object. Again our search is for both optimal and efficient mechanisms, but in a

more general informational setting. In this setting, it is convenient to tackle the

efficiency question first, so we begin by ascertaining circumstances under which

an efficient mechanism exists. We then look for optimal, or revenue maximizing, ...