Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74262
Authors: 
Manelli, Alejandro M.
Vincent, Daniel R.
Year of Publication: 
2004
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 153.2004
Abstract: 
The seller of N distinct objects is uncertain about the buyer’s valuation for those objects. The seller’s problem, to maximize expected revenue, consists of maximizing a linear functional over a convex set of mechanisms. A solution to the seller’s problem can always be found in an extreme point of the feasible set. We identify the relevant extreme points and faces of the feasible set. With N = 1, the extreme points are easily described providing simple proofs of well-known results. The revenue-maximizing mechanism assigns the object with probability one or zero depending on the buyer’s report. With N > 1, extreme points often involve randomization in the assignment of goods. Virtually any extreme point of the feasible set maximizes revenue for a well-behaved distribution of buyer’s valuations. We provide a simple algebraic procedure to determine whether a mechanism is an extreme point.
Subjects: 
Extreme point
Exposed point
Faces
Non-linear pricing
Monopoly pricing
Multidimensional
Screening
Incentive compatibility
Adverse selection
Mechanism design
JEL: 
D44
Document Type: 
Working Paper

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