An Optimal Auction for Complements

An Optimal Auction for Complements

Games and Economic Behavior. February
1997, Vol. 18, Issue 2, Pages 176-192

This paper considers the optimal selling mechanism for complementary items. When buyers are perfectly symmetric, the optimal procedure is to bundle the items and run a standard auction. In general, however, bundling the items is not necessarily desirable, and the standard auctions do not maximize revenue. Moreover, the optimal auction allocation may not be socially efficient since the auction must discriminate against bidders who have strong incentives to misrepresent their true preferences.