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The Optimality of Being Efficient

dc.contributor.authorAusubel, Lawrence M.
dc.contributor.authorCramton, Peter
dc.identifier.citation"The Optimality of Being Efficient," (with Lawrence M. Ausubel) Working Paper, University of Maryland, March 2001.
dc.description.abstractIn an optimal auction, a revenue-optimizing seller often awards goods inefficiently, either by placing them in the wrong hands or by withholding goods from the market. This conclusion rests on two assumptions: (1) the seller can prevent resale among bidders after the auction; and (2) the seller can commit to not sell the withheld goods after the auction. We examine how the optimal auction problem changes when these assumptions are relaxed. In sharp contrast to the no resale assumption, we assume perfect resale: all gains from trade are exhausted in resale. In a multiple object model with independent signals, we characterize optimal auctions with resale. We prove generally that with perfect resale, the seller’s incentive to misassign goods is destroyed. Moreover, with discrete types, any misassignment of goods strictly lowers the seller’s revenue from the optimum. In auction markets followed by perfect resale, it is optimal to assign goods to those with the highest values.en
dc.format.extent125975 bytes
dc.publisherElsevier Science
dc.subjectOptimal Auctionsen
dc.titleThe Optimality of Being Efficienten
dc.relation.isAvailableAtDigital Repository at the University of Marylanden_us
dc.relation.isAvailableAtEconomics Departmenten_us
dc.relation.isAvailableAtCollege of Behavioral and Social Sciencesen_us
dc.relation.isAvailableAtUniversity of Maryland (College Park, Md.)en_us

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