A dynamic mechanism and surplus extraction under ambiguity

@article{Bose2009ADM,
  title={A dynamic mechanism and surplus extraction under ambiguity},
  author={Subir Bose and Arup Daripa},
  journal={J. Economic Theory},
  year={2009},
  volume={144},
  pages={2084-2114}
}
We study the question of auction design in an IPV setting characterized by ambiguity. We assume that the preferences of agents exhibit ambiguity aversion; in particular, they are represented by the epsilon-contamination model. We show that a simple variation of a discrete Dutch auction can extract almost all surplus. This contrasts with optimal auctions under IPV without ambiguity as well as with optimal static auctions with ambiguity in all of these, types other than the lowest participating… CONTINUE READING
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