A Very Robust Auction Mechanism∗

A single unit of a good is to be sold by auction to one of many potential buyers. There are two equally likely states of the world. Potential buyers receive noisy signals of the state of the world. The accuracies of buyers ’ signals may differ. A buyer’s valuation is the sum of a common value component that depends on the state and an idiosyncratic private value component independent of the state. The seller knows nothing about the accuracies of the signals or about buyers’ beliefs about the accuracies. It is common knowledge among buyers that the accuracies of the signals are conditionally independent and uniformly bounded below 1 and above 1/2, and nothing more. We demonstrate a modified second price auction that has the property that, for any ε > 0, the seller’s expected revenue will be within ε of the highest buyer expected value when the number of buyers is sufficiently large and buyers make undominated bids.