While auctions gain relevance as a trading mechanism, different events show how unskilled many firms and governments are when using them. The objective of this article is to familiarize the reader with the auction theory, either to improve the auction design, if he is the auctioneer, or to orient the bidding strategy, if he is the bidder. First, we present the simplest auctions, using intuitive mathematical tools. Then, we consider more realistic setups, such as the existence of risk aversion, and the use of reservation prices. We also study the case where the goods auctioned can be later traded on the market, and those auctions where bidders can benefit from economies of complementarities if they are granted with specific bundles of goods. In both cases, the auctioneer must recognize the risks and opportunities, in order to maximize the economic value of the allocation of goods.
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Article provided by Escuela de Administracion. Pontificia Universidad Católica de Chile. in its journal ABANTE.
Find related papers by JEL classification: D44 - Microeconomics - - Market Structure and Pricing - - - Auctions Y20 - Miscellaneous Categories - - Introductions and Prefaces - - - Introductions and Prefaces
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Riley, John G & Samuelson, William F, 1981.
"Optimal Auctions,"
American Economic Review,
American Economic Association, vol. 71(3), pages 381-92, June.
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