2024/03/29 by Ian Ball, Ball, Ian, Teemu Pekkarinen +1
Business, Management and Accounting · Decision Sciences · Economics, Econometrics and Finance · #Auction Theory and Applications #Consumer Market Behavior and Pricing #FOS: Economics and business #Housing Market and Economics #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2403.19945
openalex publication_date 2024/03/29 · openalex created_date 2024/04/02 · openalex updated_date 2026/07/28
We study the design of an auction for an income-generating asset such as an intellectual property license. Each bidder has a signal about his future income from acquiring the asset. After the asset is allocated, the winner's income from the asset is realized privately. The principal can audit the winner, at a cost, and then charge a payment contingent on the winner's realized income. We solve for an auction that maximizes the principal's revenue, net of auditing costs. The winning bidder is charged linear royalties up to a cap, beyond which there is no auditing. A higher bidder pays more in cash upfront and faces a lower royalty cap.