Auction Theory, 2nd Edition

146 Mechanism Design with Interdependent Values

10.1 EFFICIENT MECHANISMS

With private values, the second-price auction allocates efficiently but as we have

seen, the question is more delicate once values are interdependent. In particu-

lar, with interdependent values none of the common auction forms is efficient

in general. The previous chapter was devoted to deriving a sufficient condition

for the English auction to have an efficient equilibrium—the average cross-

ing condition—but question of whether there exists a mechanism that allocates

efficiently even when this condition does not hold remains to be explored.

Recall from the Chapter 9 that the valuations ...