Practically Implementable Auction for a Good with Countervailing Positive Externalities

Bhirombhakdi, Kornpob and Potipiti, Tanapong (2012): Practically Implementable Auction for a Good with Countervailing Positive Externalities.

Abstract

This study theoretically presents a new auction design called "take-or-give auction." Unlike in basic auction, the take-or-give auction imposes new rules which the bidders compete for their desired allocation of the object. The auction solves the free-rider problem when applied to an object with countervailing-positive externalities. It is efficient. Moreover, by adding more rules including entry-fee rule, no sale condition and pooling rule, the extended take-or-give auction is the revenue-maximizing auction.

• Item Type: MPRA Paper
• Language: English
• Keywords: Auction design, positive externalities, countervailing
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C79 - Other; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions

References

Bagwell, K., Mavroidis, P. C., & Staiger, R. W. (2007). Auctioning countermeasures in the WTO. Journal of International Economics, 73, 309-332.

Brocas, I. (2007). Auctions with Type-Dependent and Negative Externalities: The Optimal Mechanism. Mimeo, USC.

Chen, B., & Potipiti, T. (2010, September). Optimal selling mechanisms with countervailing positive externalities and an application to tradable retaliation in the WTO. Journal of Mathematical Economics, 46(5), 825-843.

Jehiel, P., & Moldovanu, B. (2000). Auctions with downstream interaction among buyers. The RAND Journal of Economics, 31(4), 768-791.

Jehiel, P., Moldovanu, B., & Stacchetti, E. (1996). How (not) to sell nuclear weapons. The American Economic Review, 86(4), 814-829.

Lewis, T. R., & Sappington, D. E. (1989). Countervailing Incentives in Agency Problems. Journal of Economic Theory, 294-313.

Myerson, R. B. (1981). Optimal Auction Design. Mathematics of Operations Research, 58-73.