Optimal mechanism for selling a set of commonly ranked objects

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

28 Scopus Citations
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Original languageEnglish
Pages (from-to)501-512
Journal / PublicationMarketing Science
Issue number3
Publication statusPublished - May 2008
Externally publishedYes


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.

Research Area(s)

  • Auction, Common ranking, Optimal mechanism, Slot allocation