Optimal nondiscriminatory auctions with favoritsm
Date
2012-03
Authors
Arozamena, Leandro
Shunda, Nicholas
Weinschelbaum, Federico
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Journal Title
Journal ISSN
Volume Title
Publisher
Universidad de San Andrés. Departamento de Economía
Abstract
In many auction settings, there is favoritism: the seller ´s welfare depends positively on the utility of a subset of potential bidders. However, laws or regulations may not allow the seller to discriminate among bidders. We find the optimal nondiscriminatory auction in a private value, single-unit model under favoritism. At the optimal auction there is a reserve price, or an entry fee, which is decreasing in the proportion of preferred bidders and in the intensity of the preference. Otherwise, the highest-valuation bidder wins. We show that, at least under some conditions, imposing a no-discrimination constraint raises expected seller revenue.
Description
Fil: Arozamena, Leandro. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Shunda, Nicholas. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Weinschelbaum, Federico. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Shunda, Nicholas. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Weinschelbaum, Federico. Universidad de San Andrés. Departamento de Economía; Argentina.