Convergence of Nonlinear Pricing Mechanisms to Optimal Auction Mechanisms with Applications to Optimal Auctions for Heterogeneous Objects

In this paper I first present a new convergence result which will derive an optimal auction mechanism as a limit of standard nonlinear pricing mechanisms. For example, an optimal auction mechanism of Myerson (1981) will be explicitly derived as a limit of nonlinear pricing mechanisms by Mussa and Rosen (1978). Then I apply this convergence result to characterize an optimal auction mechanism for heterogeneous objects from multiproduct nonlinear pricing mechanisms of Rochet and Choné (1998). The optimal auction mechanism has the same reserve price with the nonlinear pricing mechanisms counterpart. Bunching is robust with a new source of bunching based on quantity constraints. I analytically and numerically compute examples