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Ascending auctions

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  • Cramton, Peter

Abstract

A key question of auction design is whether to use an ascending- bid or a sealed-bid format. The critical distinction between formats is that an ascending auction provides the bidders with information through the process of bidding. This information is a two-edged sword. It may stimulate competition by creating a reliable process of price discovery, by reducing the winner's curse, and by allowing efficient aggregations of items. Alternatively, the information may be used by bidders to establish and enforce collusive outcomes. Ex ante asymmetries and weak competition favor a sealed-bid design. In other cases, an ascending auction is likely to perform better in efficiency and revenue terms. Moreover, information in an ascending auction can be tailored to limit collusion.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 42 (1998)
Issue (Month): 3-5 (May)
Pages: 745-756

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Handle: RePEc:eee:eecrev:v:42:y:1998:i:3-5:p:745-756

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Web page: http://www.elsevier.com/locate/eer

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References

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  1. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  2. Eric S. Maskin & John G. Riley, 1985. "Auction Theory with Private Values," UCLA Economics Working Papers 359, UCLA Department of Economics.
  3. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
  4. Lawrence M. Ausubel & Peter Cramton, 1997. "Auctioning Securities," Papers of Peter Cramton 98wpas, University of Maryland, Department of Economics - Peter Cramton, revised Mar 1998.
  5. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
  6. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
  7. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  8. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
  9. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
  10. Klemperer, Paul, 1997. "Almost Common Value Auctions: The 'Wallet Game' and its Applications to Takeover Battles and Airwaves Auctions," CEPR Discussion Papers 1682, C.E.P.R. Discussion Papers.
  11. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  12. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
  13. Harstad, Ronald M, 1990. "Alternative Common-Value Auction Procedures: Revenue Comparisons with Free Entry," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 421-29, April.
  14. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  15. Ian Ayres & Peter Cramton, 1996. "Deficit Reduction Through Diversity: How Affirmative Action at the FCC Increased Auction Competition," Papers of Peter Cramton 96slr, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  16. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February.
  17. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1997. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 497-527, 09.
  18. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  19. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
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