Endogenous shareholding auctions

2026-07-02

AI Summary

This study investigates how a monopolist can simultaneously determine price and quantity while allocating profits through an endogenous equity-auction mechanism. The proposed mechanism uniquely internalizes consumers’ ownership shares within the auction process, eliciting demand information and distributing surplus according to bidding outcomes. By integrating mechanism design theory with axiomatic approaches, the authors conduct optimization analyses under both Bayesian and non-Bayesian frameworks, employing criteria of prior-free dominance and subjective expected welfare. They characterize the structural properties of such mechanisms and establish their optimal forms under two distinct welfare standards.

Abstract

We introduce endogenous shareholding auctions for production economies where a monopolist must elicit consumer demand in order to determine price and quantity. Each of these auctions has the property that the auction's profit is distributed across the monopolist and the consumers in accordance with ownership shares that are determined over the course of the auction. We characterize this class, and a larger class, on the basis of standard axioms. Finally, we investigate optimal auctions according to both prior-free domination and subjective expected welfare.

Problem

• endogenous shareholding
• auction design
• monopoly pricing
• consumer demand elicitation
• profit sharing

Innovation

• endogenous shareholding auctions
• monopoly pricing
• ownership shares
• prior-free domination
• subjective expected welfare