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In mechanism design/auction theory, there is a famous result by Cremer and Mclean that if agents'/bidders' valuations are even slightly correlated, then all the surplus can be extracted by the principal/auctioneer. This is what makes auction theory without i.i.d. valuations an unpopular research topic even though it's interesting from a practical point of view.

My question is: Can someone explain to me why the Cremer-Mclean result is true?

The original paper is Econometrica 1998, "Full extraction of the surplus in Bayesian and dominant strategy auctions" by Cremer and Mclean.

There is an explanation beginning on page 151 in Vijay Krishna's Auction Theory textbook.


migrated to math.stackexchange.com by Jason B May 1 '12 at 19:56

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Could you include links, please. –  Turukawa Nov 15 '11 at 22:23
They won't be opensource links anyway, but I'll add them nonetheless. –  Zermelo Nov 15 '11 at 22:52