Optimal mechanism for selling a set of commonly ranked objects

Juan Feng

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

30 Citations (Scopus)

Abstract

This paper designs an optimal mechanism for selling a set of commonly ranked objects. Although buyers rank these objects in the same order, the rates at which their valuations change for a less-preferred object might be different. Four stylized cases are identified according to this difference: parallel, convergent, divergent, and convergent-then-divergent. In general, the optimal mechanism cannot be interpreted as a conventional second-price auction. A reserve price is imposed for each object. Depending on which of the four stylized cases is considered, a higher-value bidder may be allocated a higher-ranked or lower-ranked object. There is also a positive probability that a higher-ranked object is not allocated while a lower-ranked one is allocated. In a departure from the extant mechanism-design literature, the individual-rationality constraint for a mid-range type of bidder can be binding. © 2008 INFORMS.
Original languageEnglish
Pages (from-to)501-512
JournalMarketing Science
Volume27
Issue number3
DOIs
Publication statusPublished - May 2008
Externally publishedYes

Research Keywords

  • Auction
  • Common ranking
  • Optimal mechanism
  • Slot allocation

Fingerprint

Dive into the research topics of 'Optimal mechanism for selling a set of commonly ranked objects'. Together they form a unique fingerprint.

Cite this