Second Best Efficiency and the English Auction

46 Pages Posted: 14 Sep 2009

See all articles by Angel Hernando-Veciana

Angel Hernando-Veciana

Charles III University of Madrid

Fabio Michelucci

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Date Written: September 14, 2009

Abstract

We characterize the incentive compatible allocation that maximizes the expected social surplus in a single-unit sale when the efficient allocation is not implementable. We then show that allowing for the possibility that the good remains unsold may increase the expected social surplus even when allocating the good to no bidder generates less social surplus than allocating to any of the bidders. Aside from this option, the English auction implements the second best allocation when there are only two bidders but not always with more than two bidders.

Suggested Citation

Hernando-Veciana, Angel and Michelucci, Fabio, Second Best Efficiency and the English Auction (September 14, 2009). Available at SSRN: https://ssrn.com/abstract=1473227 or http://dx.doi.org/10.2139/ssrn.1473227

Angel Hernando-Veciana

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Fabio Michelucci (Contact Author)

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz