Auction Theory, 2nd Edition

10.2 Optimal Mechanisms 155

extraction. More recent work on the generalized VCG mechanism is contained

in Ausubel (1999).

In the context of a pure common value auction, McAfee, McMillan, and Reny

(1989) relax the assumption that buyers’ signals are discrete. With continuously

distributed signals, almost all the surplus can be extracted: For any ε>0, there

exists a mechanism such that no buyer’s surplus exceeds ε. They also show

that this is the best possible result in general—in an example, no mechanism

can leave the buyers with a surplus of exactly zero. McAfee and Reny (1992)

extend this result to other mechanism design settings. In particular, they show

that with correlated signals and interdependent values, efficient trade between a

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