Optimal two-object auctions with synergies.

We design the revenue-maximizing auction for two goods when each buyer has bi-dimensional private information and a superadditive utility function (i.e., a synergy is generated if a buyer wins both goods). In this setting the seller is likely to allocate the goods inefficiently with respect to an environ-ment with no synergies. In particular, if the synergy is large then it may occur that a buyer’s valuations for the goods weakly dominate the valuations of another buyer and the latter one receives the bundle. We link this fact, which contrasts with the results for a setting without synergies, to "non-regular" one-good models.Multiple-unit Auctions; Multi-dimensional Screening; Bundling

A note on information revelation in procurement auctions

This paper is about a procurement auction setting, introduced in Gal-Or, Gal-Or and Dukes (2007), in which suppliers offer differentiated products and the buyer needs to decide whether to reveal or not to the suppliers the own preferences for the various products. We provide some technical remarks and complements to the analysis of Gal-Or, Gal-Or and Dukes (2007), and an extension to the case of risk averse suppliers.Information Revelation, Logconcavity, Risk Aversion

Revenue Comparison in Asymmetric Auctions with Discrete Valuations

We consider an asymmetric auction setting with two bidders such that the valuation of each bidder has a binary support. We prove that in this context the second price auction yields a higher expected revenue than the first price auction for a broad set of parameter values, although the opposite result is common in the literature on asymmetric auctions. For instance, the second price auction is superior both when a bidder’s valuation is more uncertain that the valuation of the other bidder, and in case of a not too large distribution shift or rescaling. In addition, we show that in some cases the revenue in the first price auction decreases when all the valuations increase [in doing so, we correct a claim in Maskin and Riley (1985), and we derive the bidders’ preferences between the two auctions.Asymmetric auctions, First price auctions, Second price auctions.

Information revelation in procurement auctions with two-sided asymmetric information

A buyer needs to procure a good from either of two potential suppliers offering differentiated products and with privately observed costs. The buyer privately observes the own valuations for the products and (ex ante) decides how much of this information should be revealed to suppliers before they play a first score auction. We show that the more significant is each supplier’s private information on the own cost, the less information the buyer should reveal. Part of our analysis is linked to the comparison between a first and a second price auction in an asymmetric setup with a distribution shift.Asymmetric auctions

Bundling electronic journals and competition among publishers

Site licensing of e-journals has been revolutionizing the way academic information is distributed. However, many librarians are concerned about the possibility that publishers might abuse site licensing by practicing bundling. In this paper, we analyze the private and social incentives for the publishers to use bundling in the context of STM electronic journal market. In the short run in which the number of journals is exogenously given, we find a strong conflict between the two incentives: each publisher finds bundling optimal and bundling increases the industry profit but reduces social welfare. However, in the long run we find that publishers might have higher incentives to introduce new journals under bundling than without bundling and, in this case, bundling can reduce the industry profit while increasing social welfare. Finally, we examine publishers’ incentive to provide links to the websites of the rival publishers under bundling and show that even asymmetric publishers have incentive to interconnect.Bundling, site licensing, interconnection, merger

Interconnection among Academic Journal Websites: Multilateral versus Bilateral Interconnection

Electronic academic journal websites provide new services of text and/or data mining and linking, indispensable for efficient allocation of attention among abundant sources of scienti…c information. Fully realizing the benefi…t of these services requires interconnection among websites. Motivated by CrossRef, a multilateral citation linking backbone, this paper performs a comparison between multilateral interconnection through an open platform and bilateral interconnection, and finds that publishers are fully interconnected in the former regime while they can be partially interconnected in the latter regime for exclusion or differentiation motives. Surprisingly, if partial interconnection arises for differentiation motive, exclusion of small publisher(s) occurs more often under multilateral interconnection. We also find that in the case of multilateral interconnection, a for-pro…fit platform induces less exclusion than an open platform. Various other extensions are analyzed.

Building an honest microfinance organization: Embezzlement and the optimality of rigid repayment schedules and joint liability

We consider the agency problem of a staff member managing microfinancing programs, who can abuse his discretion to embezzle borrowers' repayments. The fact that most borrowers of microfinancing programs are illiterate and live in rural areas where transportation costs are very high make staff's embezzlement particularly relevant as is documented by Mknelly and Kevane (2002). We study the trade-off between the optimal rigid lending contract and the optimal discretionary one and find that a rigid contract is optimal when the audit cost is larger than gains from insurance. Our analysis explains rigid repayment schedules used by the Grameen bank as an optimal response to the bank staff's agency problem. Joint liability reduces borrowers' burden of respecting the rigid repayment schedules by providing them with partial insurance. However, the same insurance can be provided by borrowers themselves under individual liability through a side-contract.Microfinance, Group Lending, Joint Liability, Embezzlement, Hierarchy, Contract

Bundling and competition for slots: On the portfolio effects of bundling

We consider competition among sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. We study how bundling affects competition for slots. Under independent pricing, equilibrium often does not exist and hence the outcome is often inefficient. When bundling is allowed, each seller has an incentive to bundle his products and an efficient equilibrium always exists. Furthermore, in the case of digital goods, all equilibria are efficient if slotting contracts are prohibited. We also identify portfolio effects of bundling and analyze the consequences on horizontal mergers. Finally, we derive clear-cut policy implications.Bundling, Portfolios, Slots (or Shelf Space), Pure Bundling, Slotting Contracts, Exclusive Dealing, Foreclosure