Robust Mechanisms Under Common Valuation

TL;DR

This paper develops robust selling mechanisms for a common-value good that guarantee near-optimal revenue despite uncertainty about buyers' information structures, with performance improving as the number of buyers increases.

Contribution

It introduces a linear programming approach to design mechanisms that maximize revenue guarantees under unknown information structures in common-value settings.

Findings

Mechanisms guarantee a baseline revenue across all information structures.

Revenue guarantee approaches full surplus as buyers increase.

The approach is optimal for a single buyer.

Abstract

We study robust mechanisms to sell a common-value good. We assume that the mechanism designer knows the prior distribution of the buyers' common value but is unsure of the buyers' information structure about the common value. We use linear programming duality to derive mechanisms that guarantee a good revenue among all information structures and all equilibria. Our mechanism maximizes the revenue guarantee when there is one buyer. As the number of buyers tends to infinity, the revenue guarantee of our mechanism converges to the full surplus.