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PUTTING
AUCTION THEORY
TO WORK
PAUL MILGROM
Stanford University
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PUBLISHED BY THE PRESS S YNDICATE OF THE U NIVERSIT Y O F C AMBRIDGE
The Pitt Building, Trumpington Street, Cambridge, United Kingdom
CAMBRIDGE U NIVERSIT Y PRESS
The Edinburgh Building, Cambridge CB2 2RU, UK
40 West 20th Street, New York, NY 10011-4211, USA
477 Williamstown Road, Port Melbourne, VIC 3207, Australia
Ruiz de AlarcoĢn 13, 28014 Madrid, Spain
Dock House, The Waterfront, Cape Town 8001, South Africa
http://www.cambridge.org
C© Paul Milgrom 2004
This book is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without
the written permission of Cambridge University Press.
First published 2004
Printed in the United States of America
Typefaces Utopia 9.75/13.5 pt. and ITC Symbol
System LATEX2ε
[TB]
A catalog record for this book is available from the British Library.
Library of Congress Cataloging in Publication Data
Milgrom, Paul R. (Paul Robert), 1948–
Putting auction theory to work / Paul Milgrom.
p. cm. – (Churchill lectures in economics)
ISBN 0-521-55184-6 (hard) – ISBN 0-521-53672-3 (pbk.)
1. Auctions – Mathematical models.
I. Title.
II. Series.
HF5476.M55 2003
381′.17′01 – dc21
2003051544
ISBN 0 521 55184 6 hardback
ISBN 0 521 53672 3 paperback
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Contents
Preface
page xi
Foreword by Evan Kwerel
xv
1 Getting to Work
1
1.1 Politics Sets the Stage
3
1.2 Designing for Multiple Goals
3
1.2.1 Substitutes and Complements
6
1.2.2 New Zealand’s Rights Auction
9
1.2.3 Better A