TY - JOUR
T1 - Optimal mechanism for selling a set of commonly ranked objects
AU - Feng, Juan
PY - 2008/5
Y1 - 2008/5
N2 - 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.
AB - 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.
KW - Auction
KW - Common ranking
KW - Optimal mechanism
KW - Slot allocation
UR - http://www.scopus.com/inward/record.url?scp=60249103161&partnerID=8YFLogxK
UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-60249103161&origin=recordpage
U2 - 10.1287/mksc.1070.0290
DO - 10.1287/mksc.1070.0290
M3 - RGC 21 - Publication in refereed journal
SN - 0732-2399
VL - 27
SP - 501
EP - 512
JO - Marketing Science
JF - Marketing Science
IS - 3
ER -