Discussion paper

DP11783 Optimal Auction Design in a Common Value Model

We study auction design when bidders have a pure common value equal to the maximum of their independent signals. In the revenue maximizing mechanism, each bidder makes a payment that is independent of his signal and the allocation discriminates in favor of bidders with lower signals. We provide a necessary and sufficient condition under which the optimal mechanism reduces to a posted price under which all bidders are equally likely to get the good. This model of pure common values can equivalently be interpreted as model of resale: the bidders have independent private values at the auction stage, and the winner of the auction can make a take-it-or-leave-it-offer in the secondary market under complete information.


Bergemann, D, B Brooks and S Morris (2017), ‘DP11783 Optimal Auction Design in a Common Value Model‘, CEPR Discussion Paper No. 11783. CEPR Press, Paris & London. https://cepr.org/publications/dp11783