Surplus extraction with rich type spaces

We characterize revenue maximizing mechanisms in auction settings with ‘rich’ type spaces, where bidders obtain information from sources other than their own valuation. The focus of the paper is on the concept of Bayes-Nash implementation. By considering a relaxed problem, we provide an upper bound on revenue extraction that explicitly builds on the richness of the information structure. We provide a condition under which this upper bound is achieved and characterize a mechanism that does it. Under this condition, we also show that the optimal revenue can be achieved with dominant strategy implementation.The characterization of optimal revenue generalizes the full surplus extraction result of Cremer and McLean (1988) as well as the standard independent private values optimal auction presented in Myerson (1981), providing a unified treatment for two sets of results considered irreconcilable so far.