Auction Design with Heterogeneous Priors

Abstract

We consider an auction design problem with private values, where the seller and bidders may enjoy heterogeneous priors about their (possibly correlated) valuations. Each bidder forms an (interim) belief about the others based on his own prior updated by observing his own value. If the seller faces uncertainty about the bidders’ priors, even if he knows that the bidders’ priors are within any given distance from his, he may find it worst-case optimal to propose a dominant-strategy auction mechanism.

Reference

Hien Pham, and Takuro Yamashita, “Auction Design with Heterogeneous Priors”, TSE Working Paper, n. 21-1260, November 2021, revised March 2023.