Optimal Deterministic Mechanism Design: Type-Independent Preference Orderings

Abstract

We investigate revenue maximisation in general allocation problems with incomplete information, where we assume quasi-linearity, private values, independent type distributions and single-dimensionality of type spaces. We require a mechanism to be deterministic, strategy-proof and ex-post individually rational. We assume that each player has a type-independent preference ordering over deterministic allocations. We show that the Myerson’s technique to solve the incentive-constrained revenue maximisation problem in single-unit auctions can be applied to general allocation problems, where the incentive-constrained revenue maximisation problem can be reduced to the simple maximisation problem of the sum of players’ virtual valuations without imposing any incentive constraint.