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A Modified English Auction: Filippo Balestrieri MIT HP Lab
A Modified English Auction: Filippo Balestrieri MIT HP Lab
Filippo Balestrieri
MIT
HP Lab
The Setting
We consider a general Informed Principal
Problem in the context of procurement.
n potential suppliers. Each one of them
privately informed about his cost of
production
One buyer. The buyer privately knows how
each supplier’s product fits her requirements
The Problem
Optimal Mechanism
Implementation Problem
-Simplicity
-Buyer’s Privacy
-Dynamic Consistency
Modified English Auction
Related Literature
Informed Principal Problem: Myerson
(83), Maskin Tirole (90, 92)
Scoring Auctions: Che (93), Asker
Cantillon (05)
Strategic Use of Private Information in
designing the optimal mechanism:
Ganuza (99), Rezende (06), Skreta (07)
The Environment
One good procurement auction
IPV (a’ la Maskin Tirole 90)
cost of production of supplier i
ci ~ Fi [ci , ci ]
where
Fi x
J i x x
f i x
Modified English Auction
At each round t, the buyer chooses the
supplier who guarantees hers the
highest marginal utility
arg max ei bi
Fi bi
t
t
t
iN f i bi
Modified English Auction
The payment the winner gets is equal
to his standing bid
bT 1
w Jw
1
ew e2h J 2h c2h cw*
Remarks
The Modified English Auction is
simple
dynamic consistent
Remarks
The mechanism inherits from the
English Auction the fact that the buyer
(the auctioneer) makes a sequence of
offers. However, the offers are not open
and direct to the general audience, but
confidential and specific to each
supplier.
Remarks
Deferred Acceptance Algorithm
Multi-party simultaneous bargaining