Events

Prof. Li, Hao
Professor of Economics
University of British Columbia

A seller of an indivisible good faces buyers who draw their private values independently from the same distribution. The seller commits to an “auction” that maps a profile of bids to a take-it-or-leave-it offer to a selected buyer, but this mapping is unobserved by buyers. In any equilibrium where the seller makes a finite number of given offers, each offer corresponds to a bid, with the lowest being the monopoly price. A buyer with any value above the monopoly price randomizes over the highest bid below his value and all higher bids, while the seller selects the highest bid and randomizes over this and all lower offers. The bidding strategy for buyers with value below the monopoly price determines the seller’s equilibrium revenue. It is minimized, to the monopoly revenue, when they bid independently of their values, and maximized when their bids generate a first order stochastic dominated distribution of the highest bid among all buyers. The maximal revenue increases with the number of offers. In the most profitable equilibrium, all offers above the monopoly price are made.