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Profit Maximizing in Auctions of Public Goods

Paper:ewp-game/9707010
From:    
Date: Tue, 22 Jul 97 08:46:28 CDT
Date (revised): Wed, 1 Apr 1998 02:42:47 -0600

Title: Profit Maximizing in Auctions of Public Goods
Author: Dirk Alboth (Paderborn University) and Anat Lerner (Tel-Aviv University) and Jonathan Shalev (CORE)
Contact:
Comments: Type of Document - LaTeX; prepared on IBM PC; to print on PostScript; pages: 32 ; figures: 3 eps files included. Comments welcome
Keywords: public goods, auctions, externalities
JEL: C00, C72, D44, D82, H41
EWPA-references:
Report-no: CORE-DP-9817

Abstract:

A profit-maximizing auctioneer can provide a public good to a group of agents. Each group member has a private value for the good being provided to the group. We investigate an auction mechanism where the auctioneer provides the good to the group, only if the sum of their bids exceeds a reserve price declared previously by the auctioneer. For the two-bidder case with private values drawn from a uniform distribution we characterize the continuously differentiable symmetric equilibrium bidding functions for the agents, and find the optimal reserve price for the auctioneer when such functions are used by the bidders. We also examine another interesting family of equilibrium bidding functions for this case, with a discrete number of possible bids, and show the relation (in the limit) to the differentiable bidding functions.

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