Allocative and Informational Externalities in Auctions and Related Mechanisms

We study the effects of allocative and informational externalities in (multi-object) auctions and related mechanisms. Such externalities naturally arise in models that embed auctions in larger economic contexts. In particular, they appear when there is downstream interaction among bidders after the auction has closed. The endogeneity of valuations is the main driving force behind many new, specific phenomena with allocative externalities: even in complete information settings, traditional auction formats need not be efficient, and they may give rise to multiple equilibria and strategic non-participation. But, in the absence of informational externalities, welfare maximization can be achieved by Vickrey-Clarke- Groves mechanisms. Welfare-maximizing Bayes-Nash implementation is, however, impossible in multi-object settings with informational externalities, unless the allocation problem is separable across objects (e.g. there are no allocative externalities nor complementarities) or signals are one-dimensional. Moreover, implementation of any choice function via ex-post equilibrium is generically impossible with informational externalities and multidimensional types. A theory of information constraints with multidimensional signals is rather complex, but indispensable for our study.

Using Options with Set Exercise Prices to Reduce Bidder Exposure in Sequential Auctions

The exposure problem appears whenever an agent with complementary valuations bids to acquire a bundle of items sold sequentially, in separate auctions. In this talk, we review a possible solution that can help solve this problem, which involves selling options for the items, instead of the items themselves. We provide a brief overview of the state of the art in this field and discuss, based on our recent results, under which conditions using option mechanisms would be desirable for both buyers and sellers, by comparison to direct auctioning of items. We conclude with a brief discussion of further research directions in this field, as well as the relation to other techniques proposed to address the problem, such as leveled commitment mechanisms

Coalition Formation in Games without Synergies

This paper establishes sufficient conditions for the existence of a stable coalition structure in the ”coalition unanimity” game of coalition formation, first defined by Hart and Kurz (1983) and more recently studied by Yi (1997, 2000). Our conditions are defined on the strategic form game used to derive the payoffs the game of coalition formation. We show that if no synergies are generated by the formation of coalitions, a stable coalition structure always exists provided that players are symmetric and either the game exhibits strategic complementarity or, if strategies are substitutes, the best reply functions are contractions. We illustrate the role of synergies in a Cournot oligopoly example with cost reducing R&D.Coalition formation, Synergies, Strong Nash equilibrium