Optimal Auction Design with Contingent Payments and Costly Verification
Fuente:
arXiv
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| Autori principali: | , |
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| Natura: | Preprint |
| Pubblicazione: |
2024
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| _version_ | 1866910133407186944 |
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| author | Ball, Ian Pekkarinen, Teemu |
| author_facet | Ball, Ian Pekkarinen, Teemu |
| contents | We study the design of an auction for an income-generating asset such as an intellectual property license. Each bidder has a signal about his future income from acquiring the asset. After the asset is allocated, the winner's income from the asset is realized privately. The principal can audit the winner, at a cost, and then charge a payment contingent on the winner's realized income. We solve for an auction that maximizes the principal's revenue, net of auditing costs. The winning bidder is charged linear royalties up to a cap, beyond which there is no auditing. A higher bidder pays more in cash upfront and faces a lower royalty cap. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2403_19945 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Optimal Auction Design with Contingent Payments and Costly Verification Ball, Ian Pekkarinen, Teemu Theoretical Economics We study the design of an auction for an income-generating asset such as an intellectual property license. Each bidder has a signal about his future income from acquiring the asset. After the asset is allocated, the winner's income from the asset is realized privately. The principal can audit the winner, at a cost, and then charge a payment contingent on the winner's realized income. We solve for an auction that maximizes the principal's revenue, net of auditing costs. The winning bidder is charged linear royalties up to a cap, beyond which there is no auditing. A higher bidder pays more in cash upfront and faces a lower royalty cap. |
| title | Optimal Auction Design with Contingent Payments and Costly Verification |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2403.19945 |