A theory of auctions with endogenous valuations

Alex Gershkov, Benny Moldovanu, Philipp Strack, Mengxi Zhang

Research output: Contribution to journalArticlepeer-review


We derive the symmetric, revenue-maximizing allocation of several units among agents who take costly actions that influence their values. The problem is equivalent to a reduced-form model where agents have nonexpected utility. The uniform-price auction and the discriminatory pay-your-bid auction with reserve prices that react to both demand and supply constitute symmetric, optimal mechanisms. We also identify a condition under which the overall optimal mechanism is indeed symmetric and illustrate the structure of the optimal asymmetric mechanism when the condition fails. The main tool in our analysis is an integral inequality based on Fan and Lorentz (1954).

Original languageEnglish
Pages (from-to)1011-1051
Number of pages41
JournalJournal of Political Economy
Issue number4
StatePublished - Apr 2021
Externally publishedYes


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