Suppose the principal wishes to maximize aRev + (1-a)W for a (0, 1). What is the...

 

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Suppose the principal wishes to maximize aRev + (1-a)W for a (0, 1). What is the optimal mechanism? Suppose there are two symmetric agents with distribution F(.). Suppose the seller wishes the allocate the good to the agent with the highest value. Can you design a payment scheme such that agents' payoffs depend on their types but not on other agents' types? Argue that revenue is always positive if ~ U[0, 1]. Argue that revenue can be negative for some F(.) and some type realizations. Suppose the principal wishes to maximize aRev + (1-a)W for a (0, 1). What is the optimal mechanism? Suppose there are two symmetric agents with distribution F(.). Suppose the seller wishes the allocate the good to the agent with the highest value. Can you design a payment scheme such that agents' payoffs depend on their types but not on other agents' types? Argue that revenue is always positive if ~ U[0, 1]. Argue that revenue can be negative for some F(.) and some type realizations.

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To maximize the expression Rev 1 aW where Rev represents the revenue and W represents the welfare the principal needs to design an optimal mechanism I... View the full answer