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Near-optimality of second price mechanisms in a class of asymmetric auctions

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  • Mares, Vlad
  • Swinkels, Jeroen M.
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    Abstract

    Consider a setting with n sellers having i.i.d. costs with log-concave density f from cumulative F, and a buyer who puts a premium [Delta]i on procuring from seller i. We show how for any given [Delta]1,...,[Delta]n, a simple second price bonus auction can be chosen which comes surprisingly close to giving the auctioneer the same surplus as an optimal mechanism. The bonuses depend only on the magnitude and monotonicity of the slope of virtual costs given F. We show that these in turn depend only on fairly coarse information about F. We explore how this result generalizes to asymmetrically distributed costs.

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    Bibliographic Info

    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 72 (2011)
    Issue (Month): 1 (May)
    Pages: 218-241

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    Handle: RePEc:eee:gamebe:v:72:y:2011:i:1:p:218-241

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    Web page: http://www.elsevier.com/locate/inca/622836

    Related research

    Keywords: Asymmetric auctions Mechanism design Second price auctions Procurement Rho-concavity;

    References

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    1. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Social Choice: A Mean Voter Theorem," Discussion Papers 1989_31, Columbia University, Department of Economics.
    2. Justin Marion, 2009. "How Costly Is Affirmative Action? Government Contracting and California's Proposition 209," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 503-522, August.
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    4. Anderson, Simon P. & Renault, Regis, 2003. "Efficiency and surplus bounds in Cournot competition," Journal of Economic Theory, Elsevier, vol. 113(2), pages 253-264, December.
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    12. Leandro Arozamena & Estelle Cantillon, 2004. "Investment incentives in procurement auctions," ULB Institutional Repository 2013/9005, ULB -- Universite Libre de Bruxelles.
    13. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
    14. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
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    Cited by:
    1. Björn Bartling & Nick Netzer, 2014. "An Externality-Robust Auction: Theory and Experimental Evidence," CESifo Working Paper Series 4771, CESifo Group Munich.
    2. Rahul Deb & Mallesh Pai, 2013. "Symmetric Auctions," Working Papers tecipa-486, University of Toronto, Department of Economics.
    3. Vlad Mares & Jeroen Swinkels, 2014. "Comparing first and second price auctions with asymmetric bidders," International Journal of Game Theory, Springer, vol. 43(3), pages 487-514, August.
    4. Björn Bartling & Nick Netzer, 2014. "An externality-robust auction: theory and experimental evidence," ECON - Working Papers 153, Department of Economics - University of Zurich.

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