Auctions: Theory and Practice (original) (raw)
Related papers
Journal of Economic Surveys, 1996
This is a detailed introduction to auction theory. It begins with a simple analysis of standard auctions and then uses a strikingly simple general solution of symmetric private values auctions to prove the payoff equivalence of many auction rules. The basic framework is then modified to admit risk aversion, multi-unit and repeated auctions as well as collusion. Then follows an introduction to optimal auctions, with and without stochastic entry, and to common value auctions and the winner's curse problem. The survey closes with a sample of applications, from the regulation of natural monopolies to price competition in oligopoly and the government securities market.
Auction Theory: A Guide to the Literature
SSRN Electronic Journal, 1999
This paper provides an elementary, non-technical, survey of auction theory, by introducing and describing some of the critical papers in the subject.
An economic perspective on auctions
Economic Policy, 2003
The recent spectrum auctions in Europe have shown that serious problems can arise in auctions where multiple complementary objects are being sold (such as blocks of radio spectrum) that will subsequently be used by the winning bidders to compete against each other in downstream markets. Other important instances of such situations include takeoff and landing slots at airports and rights for electricity and gas transmission. We first review some of the theory describing multi-object auctions. We next outline the importance of strategic effects arising in auctions that are followed by competition between the bidders, and the tension arising between various goals such as efficiency and revenue maximization. Although more flexible auction formats can have virtues (particularly in taking into account complementarities), they can also be manipulated by bidders to build market power to the detriment of consumers. We next apply these insights to the recent European UMTS licence auctions. Finally we draw the main conclusions and policy implications.
Going, going, gone! A swift tour of auction theory and its applications
De Economist, 2006
This paper provides a swift tour of auction theory and its applications. Among the questions it considers are: How much do bidders bid in commonly studied single-object auctions? How e¢ cient are these auctions? How much revenue do they generate? Which single-object auction maximizes the seller's expected revenue? What is the best way to auction incentive contracts? And, how e¢ cient and complex are multi-object auctions?
Auctions in Theory and Practice
International Series in Operations Research & Management Science, 2000
In many policy contexts, efficiency is the primary consideration in structuring auctions. In this paper, we survey several sources of inef-Þciency arising in auctions. We Þrst highlight the effects of demand reducing incentives, both in theory and in practice, in multi-unit auctions. Next, we study inefficiencies arising from interdependence in bidder valuations. Again, we highlight both theoretical insights as well as how these translate in practice. Finally, we present an impossibility theorem for attaining efficiency in sufficiently rich auction contexts. An auction form suggested by Klemperer is discussed as a means of ameliorating inefficiencies arising in practice. JEL ClassiÞcation Nos. D44, D82 Keywords: Auctions, Efficiency * Updated copies of this paper can be found at www.wws.princeton.edu/\~rjmorgan. † This paper was prepared for the conference, Central Bank Operations: Theory and Evidence. This conference was organized by the Center for European Integration Studies with the support of Bank of Spain, Deutsche Bundesbank, and European Central Bank. The Þnancial assistance of the above entities is gratefully acknowledged. I also thank Michael Baye, Vijay Krishna, and Benny Moldovanu for useful comments. The editorial assistance of Heather Morgan was invaluable in enhancing the readability of this paper.
Auction Theory for Auction Design
the item, his problem would be trivial: he would simply make a 'take-it-or-leave-it' offer to the buyer with the highest willingness to pay. Of course, in actual practice, the seller does not have the required information, and in these circumstances, he may set the price too low, in which case he does not expropriate what the market can bear, or he may set the price too high, so that he does not succeed in selling the item.
Basic auction theory revisited
International Journal of Economic Theory, 2015
We revisit the benchmark model of auctions and consider a more general class of utility functions that allow for income effects. We assume that all individuals have the same utility function but have different incomes. Incomes are private information. We analyze first-price, secondprice, and all-pay auctions and show that non-quasilinearity changes many basic results of the benchmark model. While Vickrey's (1961) result on second-price auctions is very robust, revenue equivalence breaks down even with risk-neutral bidders, high enough incomes and identically and independently distributed types. In most cases, we find that all-pay auctions fetch the highest expected revenue.
Introduction to Combinatorial Auctions
Combinatorial Auctions, 2005
Combinatorial auctions are those auctions in which bidders can place bids on combinations of items, called "packages," rather than just individual items. The study of combinatorial auctions is inherently interdisciplinary. Combinatorial auctions are in the first place auctions, a topic extensively studied by economists. 1 Package bidding brings in operations research, especially techniques from combinatorial optimization and mathematical programming. Finally, computer science is concerned with the expressiveness of various bidding languages, and the algorithmic aspects of the combinatorial problem. The study of combinatorial auctions thus lies at the intersection of economics, operations research, and computer science. In this book, we look at combinatorial auctions from all three perspectives. Indeed, our contribution is to do so in an integrated and comprehensive way. The initial challenge in interdisciplinary research is defining a common language. We have made an effort to use terms consistently throughout the book, with the most common terms defined in the glossary. There are numerous examples of combinatorial auctions in practice. As is typical of many fields, practice precedes theory. Simple combinatorial auctions have been used for many decades in, for example, estate auctions. A common procedure is to auction the individual items, and then, at the end, to accept bids for packages of items. If a package bid exceeds the sum of the individual bids for the items in the package, then the items are sold as a package. In this book we consider a variety of much more general combinatorial auctions, but the key ingredient is the same as in this simple case: each bidder can submit bids on packages of items. 2 Recently, combinatorial auctions have been employed in a variety of industries. For example, they have been used for truckload transportation, bus routes, and industrial procurement, and have been proposed for airport arrival and departure slots, as well as for allocating radio spectrum for wireless communications services. Combinatorial auctions for radio spectrum have been conducted in both the United States and Nigeria. In each case, the compelling motivation for the use of a combinatorial auction is the presence of complementarities among the items which differ across bidders. For example, a trucker's cost of handling shipments in one lane depends on its loads in other lanes. Similarly, a mobile phone operator may value licenses in two adjacent cities more than the sum of the individual license values, since the operator's customers value roaming between cities.