Auctions with costly information acquisition Constrained Bidders

We consider auction environments in which bidders must incur a cost to learn their valuations and study the optimal selling mechanisms in such environments. These mechanisms specify for each period, as a function of the bids in previous periods, which new potential buyers should be asked to bid. In addition, these mechanisms must induce buyers to both acquire and to reveal truthfully their valuations. Using a generalized Groves principle, we prove a very general “full extraction of the surplus” result: the seller can obtain the same profit as if he had full control over the buyers’ acquisition of information and could have observed directly their valuations once they are informed. We also present appealing implementations of the optimal mechanism in special cases.mechanism design, selling mechanisms, auctions, information acquisition, search procedures

Optimal Search Auctions

We study the design of profit maximizing single unit auctions under the assumption that the seller needs to incur costs to contact prospective bidders and inform them about the auction. With independent bidders’ types and possibly interdependent valuations, the seller’s problem can be reduced to a search problem in which the surplus is measured in terms of virtual utilities minus search costs. Compared to the socially efficient mechanism, the optimal mechanism features fewer participants, longer search conditional on the same set of participants, and inefficient sequence of entry.optimal auctions, search cost, search mechanism