Optimal Auction Design with Aftermarket Cournot Competition

19 Pages Posted: 8 May 2023

See all articles by Yanlin Chen

Yanlin Chen

Nanjing Audit University

Audrey Hu

City University of Hong Kong (CityU) - Department of Economics & Finance

Jun Zhang

University of Technology Sydney (UTS)

Abstract

We study an optimal information/mechanism design problem for selling an object to a number of privately informed bidders, in which the winning bidder competes with a third party under differentiated Cournot competition afterwards. We show how to decompose the problem into two sub-problems: Bayesian persuasion and standard mechanism design. Full disclosure of the winner s marginal cost emerges as the unique optimal information policy, combined with allocating the auctioned object to the bidder with the highest virtual surplus.

Keywords: Mechanism Design, Bayesian persuasion, Auctions, Aftermarket, Cournot Competition

Suggested Citation

Chen, Yanlin and Hu, Audrey and Zhang, Jun, Optimal Auction Design with Aftermarket Cournot Competition. Available at SSRN: https://ssrn.com/abstract=4441854 or http://dx.doi.org/10.2139/ssrn.4441854

Yanlin Chen

Nanjing Audit University ( email )

86 Yushan West Road
Nanjing, Jiangsu 210017
China

Audrey Hu (Contact Author)

City University of Hong Kong (CityU) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Jun Zhang

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

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