  We study the problem of selling a resource through an auction mechanism. The
winning buyer in turn develops this resource to generate profit. Two forms of
payment are considered: charging the winning buyer a one-time payment, or an
initial payment plus a profit sharing contract (PSC). We consider a symmetric
interdependent values model with risk averse or risk neutral buyers and a risk
neutral seller. For the second price auction and the English auction, we show
that the seller's expected total revenue from the auction where he also takes a
fraction of the positive profit is higher than the expected revenue from the
auction with only a one-time payment. Moreover, the seller can generate an even
higher expected total revenue if, in addition to taking a fraction of the
positive profit, he also takes the same fraction of any loss incurred from
developing the resource. Moving beyond simple PSCs, we show that the auction
with a PSC from a very general class generates higher expected total revenue
than the auction with only a one-time payment. Finally, we show that suitable
PSCs provide higher expected total revenue than a one-time payment even when
the incentives of the winning buyer to develop the resource must be addressed
by the seller.
