Optimal Mechanism Design: Type-Independent Preference Orderings (Published in the Japanese Economic Review 69 (4), 2018.)

Abstract

We investigate revenue maximization in general allocation problems with
incomplete information, where we assume quasi-linearity, private values, independent
type distributions, and single-dimensionality of type spaces. We require a mechanism to
satisfy strategy-proofness and ex-post individual rationality. We assume that each
player has a type-independent preference ordering over deterministic allocations. We
show that the Myerson’s technique to solve the incentive-constrained revenue
maximization problem in single-unit auctions can be applied to general allocation
problems, where the incentive-constrained revenue maximization problem can be
reduced to the simple maximization problem of the sum of players’ marginal revenues
without imposing any incentive constraint.