Abstract. We study an auction setting with risk averse seller and correlated bidders’ values. We first rely on a result by Che and Kim [Che, Y.-K., Kim, J., 2005. Robustly Collusion-Proof Implementation. Mimeo, University of Wisconsin, available at http://www.ssc.wisc.edu/~yche/home.htm.] to argue that when there are enough bidders and/or types, the seller can generically obtain both the complete information expected revenue and perfect insurance. Then we consider a specific two-bidder–two-type environment in which the above first-best is not attainable and examine the seller’s incentives to leave rents to the bidders and/or to allocate the object inefficiently in order to reduce his risk. We find that: (i) no tradeoff exists between risk and extracting the bidders’ rents when correlation is negative and strong; (ii) the seller’s expected revenue is lower than under complete information if he is sufficiently risk averse and/or correlation is weak; and (iii) allocative efficiency may decrease as correlation becomes stronger.

Full surplus extraction by a risk averse seller in correlated environments / Domenico Menicucci. - In: MATHEMATICAL SOCIAL SCIENCES. - ISSN 0165-4896. - STAMPA. - 51:(2006), pp. 280-300. [10.1016/j.mathsocsci.2005.12.004]

Full surplus extraction by a risk averse seller in correlated environments

MENICUCCI, DOMENICO
2006

Abstract

Abstract. We study an auction setting with risk averse seller and correlated bidders’ values. We first rely on a result by Che and Kim [Che, Y.-K., Kim, J., 2005. Robustly Collusion-Proof Implementation. Mimeo, University of Wisconsin, available at http://www.ssc.wisc.edu/~yche/home.htm.] to argue that when there are enough bidders and/or types, the seller can generically obtain both the complete information expected revenue and perfect insurance. Then we consider a specific two-bidder–two-type environment in which the above first-best is not attainable and examine the seller’s incentives to leave rents to the bidders and/or to allocate the object inefficiently in order to reduce his risk. We find that: (i) no tradeoff exists between risk and extracting the bidders’ rents when correlation is negative and strong; (ii) the seller’s expected revenue is lower than under complete information if he is sufficiently risk averse and/or correlation is weak; and (iii) allocative efficiency may decrease as correlation becomes stronger.
2006
51
280
300
Domenico Menicucci
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Utilizza questo identificatore per citare o creare un link a questa risorsa: https://hdl.handle.net/2158/214397
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