Abstract: In this paper problem of optimal auction design of selling a divisible common-value object under an assumption that the seller faces two asymmetrically informed risk-averse bidders and one uninformed risk-neutral bidder is analyzed. The optimal mechanism design model is established for maximizing seller's expected revenue under all bidders' rational participation constraints and informed bidders' incentive compatibility constraints. The necessary and sufficient condition for the informed bidders' incentive compatibility constraints to be satisfied is given used and to simplify the seller's expected revenue maximization problem. The seller's revenue maximization problem is solved by ignoring its randomness and find that the seller allocates some goods to the informed bidder if and only if his reported value is higher than a particular threshold; the higher the reported value by the informed bidders is, the more goods will be allocated to him. Our research results can provide some suggestions for mechanism design for stock or bond issuance because the shares and bonds can be seen divisible and common-valued goods.

Key words: mechanism design, risk aversion, asymmetric auction, divisible goods, common value