A Note on Optimal Allocation Mechanisms
10 Pages Posted: 13 Oct 2008
Date Written: April 2008
This paper studies revenue-maximizing allocation mechanisms for multiple goods where the buyerís 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
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