Optimal Search Auctions with Correlated Bidder Types

We study the design of profit maximizing single unit auctions under the assumptions that (i) the bidders’ values are correlated and (ii) the seller needs to incur search costs when contacting prospective bidders. We show that although in general, the seller cannot fully extract the social surplus as in the case without search costs, it is nontheless possible to construct a search mechanism that will fully extract the surplus with an arbitrarily high probabilit