Chapter

Mechanism Design

Flavio M. Menezes and Paulo K. Monteiro

in An Introduction to Auction Theory

Published in print November 2004 | ISBN: 9780199275984
Published online April 2005 | e-ISBN: 9780191602214 | DOI: http://dx.doi.org/10.1093/019927598X.003.0006
Mechanism Design

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This chapter discusses how auction theory under independent types can be presented as a mechanism design problem. It is shown that any two mechanisms that allocate the object in the same way and yield the same expected surplus to the individual with the lowest type will generate the same expected revenue for the seller. A general version of the Revenue Equivalence Theorem is presented and the optimal auction is characterized.

Keywords: auctions; mechanism design; optimal auction; Revenue Equivalence Theorem

Chapter.  20862 words.  Illustrated.

Subjects: Microeconomics

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