A Note on Optimal Allocation Mechanisms
10 Pages Posted: 17 Apr 2008
Date Written: April, 2008
This paper studies revenue-maximizing allocation mechanisms for multiple goods where the buyer's utility can depend non-linearly in his type. We point out that despite strictly increasing virtual utilities, the allocation rule obtained via pointwise optimization may fail to be increasing and thus it may violate incentive compatibility. More importantly, the revenue maximizing allocation may involve randomizations between di¤erent allocations.
Keywords: mechanism, design, optimal auctions, bunching
JEL Classification: C72, D44, D82
Suggested Citation: Suggested Citation