Auctions with Withdrawal Rights
Research Seminars: Virtual Market Design SeminarA Foundation for Uniform Price
When bidders have correlated private information, optimal auction mechanisms screen bidders based on their beliefs. The paper presented in this Virtual Market Design Seminar shows that the possibility of ex post withdrawal by bidders provides a foundation for uniform price auctions that applies even in settings with correlated information. Withdrawal rights therefore provide a realistic framework for studying optimal auction design with correlated information. The results are not driven by ex post individual rationality constraints or their interaction with the winner’s curse. Instead, the analysis relies on a strategic impact of withdrawal rights: bidders can engage in “double deviations” that involve misreporting and then (sometimes) withdrawing ex post.
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