Auctions with Contingent Payments – an Overview

I survey a literature on auctions with contingent payments, that is auctions in which payments are allowed to depend on an ex-post verifiable variable, such as revenues in oil lease auctions. Based on DeMarzo et al. (2005), I describe a partial ranking of auction revenues for auctions that differ in terms of contract forms, pricing rules and seller commitment and why the revenue equivalence theorem does not apply even in an independent private values setup. I discuss models that incorporate adverse selection, moral hazard, competition between auctioneers, common values and the sale of multiple units.