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n1
b (bi) .
n2
b (bi) f b (bi)
1
b0(b1(b
i ))
n1
b (bi)
f (s)
.
F (s)
F n1(
s)d
s
F n1(s)
(1)
si
F n1(
s)d
s.
F n1(
s)d
s
F n1(s)
(2)
Rs
b(s) = s
F n1(
s)d
s
F n1(s)
1
F n1(s)
sdF
n1
1:n1 1:n1
(
s) = E S
|S
s .
si
F n1(
s)d
s=
Z
s
si
F n1(
s)d
s,
Z
s
si
F n1(
s)d
s=
si
sdF n1(
s),
So
bA(s) = sF n1(s)
Z
s
F n1(
s)d
s
A General Model
Bidders i = 1, ..., n
Signals S1, ..., Sn with joint density f ()
Value to bidder i is v(si, si).
Affiliated Signals
Signals are (i) exchangeable, and (ii) affiliated.
Signals are exchangeable: s0 is permutation of s f (s) = f (s0).
Signals are affiliated : For any s01 > s001 , s02 > s002 , we have
f (s01|s02) f (s01|s002 )
.
f (s001 |s02) f (s001 |s002 )
i.e. sj |si has monotone likelihood ratio property.
This implies, but is not equivalent to
F (s1|s02) F (s1|s002 )
for all s1. (FOSD)
s
i
i
i
ESi v(si, Si) | si, S = s b(s ) 1{b(si)bi}f (si|si)dsi
or
Z
max
bi
b1 (bi )
i
i
i
ESi v(si, Si) | si, S = s b(s ) dF (si|si)
1
b0(b1(bi))
i
1
1
ESi v(si, Si) | si, S = b (bi) b(b (bi)) f (b1(bi)|si)
or simplifying:
bi = b(si) = ESi v(si, Si) | si, max sj = si
j6=i
Linkage Principle
Standard auctions A, B with symmetric, increasing eqa bA( ), bB ( )
Let W A(
s, s) denote the expected price paid by bidder 1 if he is the
winning bidder when he receives a signal s but bids as if his signal
were s.
Let W2A(s, s) denote the partial w.r.t. the second argument. That
is, W2 measures how much the expected price increases with increases in the bidders valuation, holding bidding strategy constant.
Theorem 1 Suppose that for all s,
W2A(s, s) W2B (s, s).
Then the expected revenue in A is at least as large as the expected
revenue in B.
Royalties
When the value can be observed by all parties ex-post (even imperfectly), expected revenue is higher when part of the price is a royalty
based on the observed value.
Again, a linkage of available information to final price.