Mechanism Design with Interdependent Valuations: Surplus Extraction

Claudio Mezzetti -- University of North Carolina, Department of Economics, mezzetti@email.unc.edu

abstract

If valuations are interdependent and agents observe their own allocation payoffs, then two-stage revelation mechanisms expand the set of implementable decision functions. In a two-stage revelation mechanism, first agents report their private signals and the allocation is decided, then agents report their payoffs from the allocation and final transfers are made. Conditions are provided under which an uninformed seller can either extract full surplus, or within e of full surplus, from a sale to privately informed buyers, in spite of the buyers' types being independent random variables.

Keywords: Auctions, Surplus Extraction, Interdependent Valuations, Mechanism Design.

JEL: D44, D82.