Revenue Comparison in Asymmetric Auctions with Discrete Valuations
AbstractWe consider an asymmetric auction setting with two bidders such that the valuation of each bidder has a binary support. We prove that in this context the second price auction yields a higher expected revenue than the first price auction for a broad set of parameter values, although the opposite result is common in the literature on asymmetric auctions. For instance, the second price auction is superior both when a bidder’s valuation is more uncertain that the valuation of the other bidder, and in case of a not too large distribution shift or rescaling. In addition, we show that in some cases the revenue in the first price auction decreases when all the valuations increase [in doing so, we correct a claim in Maskin and Riley (1985), and we derive the bidders’ preferences between the two auctions.
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Bibliographic InfoPaper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa in its series Working Papers Series with number wp2011_08.rdf.
Length: 32 pages
Date of creation: 2011
Date of revision:
Asymmetric auctions; First price auctions; Second price auctions.;
Other versions of this item:
- Nicola Doni & Domenico Menicucci, 2011. "Revenue Comparison in Asymmetric Auctions with Discrete Valuations," Economics Working Papers ECO2011/27, European University Institute.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Nicola Doni & Domenico Menicucci, 2011. "Information revelation in procurement auctions with two-sided asymmetric information," Working Papers Series wp2011_14.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
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