We study the second best in a single unit sale to two bidders. This is the allocation that maximizes the expected social surplus subject to the bidders' incentive compatible constraints when the first best is not implementable. We prove that Maskin's (1992) result that any first best allocation that is deterministic and monotone can be implemented with the English auction carries over to the second best. (C) 2011 Elsevier Inc. All rights reserved.
Second best efficiency and the English auction
Michelucci F.
2011-01-01
Abstract
We study the second best in a single unit sale to two bidders. This is the allocation that maximizes the expected social surplus subject to the bidders' incentive compatible constraints when the first best is not implementable. We prove that Maskin's (1992) result that any first best allocation that is deterministic and monotone can be implemented with the English auction carries over to the second best. (C) 2011 Elsevier Inc. All rights reserved.
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