Auction Design without Commitment



Let x allocate the good to player i. By stationarity, since g h ex post dominates
1x, g h cannot be a constant mechanism. By IC there are θ0 supp(p(x, φE[p])),
s h(θ0), and j 6= i such that θ0i = θ0j, and such that g(s) allocates the good to j.
By Lemma 1, 1g(s) = σ[p(x, φE [p])(s, h)]. Since

1x VIC[p(x,φE[p])] VIC[p(x,φE[p])(s,h))],

it follows by Lemma 2 that v(g(s)) v(x).

By (8), supp(p(x, φE [p])) Yi and, by the definition of support,
supp
(p(x, φE[p])(s, h)) supp(p(x, φE [p])).

Thus, by the construction of w, EXP-IR, and Lemma 1, σ[1θ0]=1x. However, since
g(s) h(θ0), also supp(1θ0 ) supp(p(x, φE [p])(s, h)). This implies, by stationarity,
that
g(s) = x, violating the assertation that x allocates the good to i and g(s) to
j = i. ■

Now we prove that if a stationary σ is consistent and meets the one-deviation
property relative to
C, then there is a tie-breaking rule w such that no element of
C [p] is ex post dominated by φE for any q.

Lemma 6 Let a stationary choice rule σ satisfy consistency and the one-deviation
property. Then
Cσ [p] CφE [p], for all p, for some tie-breaking rule w.

Proof. Let gh Cσ[p] and s h(supp(p)). Denote x = g(s) and q = p(s, h).
By Lemma 1, σ[q] = 1x. Identify w as in Lemma 5. It suffices for us to show
that
1x is not ex post dominated by φE [q]. Suppose, to the contrary, that it
is. By Lemma 5,
φE [q] Cσ [q]. By the definition of one-deviation property,
v(σ[q], q) v(φE [q],q). Thus v(x) v(φE[q], q).

Take any y φE[q](supp(q)). Then supp(q(y, φE [q])) supp(q) and, hence,

x {x0 : 1x0 VIC[q]} {x0 : 1x0 V IC[q(y, φE[p])]}.

Since, by Lemma 1, σ[q(y, φE[q])] = 1y and 1x V IC[q(y, φE[q])], it follows
by Lemma 2 that
v(x) v(y). Since y was arbitrary, and v(x) v(φE[q],q),
the inequality must hold as equality. But then, since supp(q(y, φE [q])) supp(p),
stationarity implies that x = y. Thus φE [q]=1x , which contradicts the hypothesis
that
φE [q] ex post dominates 1x. ■

By Lemma 6, a stationary and consistent σ that meets the one-deviation prop-
erty is not ex post dominated by some English auction. Hence
σ[p] cannot allocate
the good to anyone but the buyer with the highest valuation. Therefore,
σ [p] must
be efficient. Another way to put this is that commitment inability of the seller
leads to an efficient allocation, as suggested by the ”Coase theorem".

Since σ [p] is efficient, and the lowest type of a buyer earns zero payoff, the
revenue equivalence theorem implies that φE [p] is the (generically) unique im-
plementable mechanism if the buyers’ valuations are independent. However, we
can say more: by Lemma 4, if the seller is unable to commit, the uniqueness of

13



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