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Ranking Asymmetric Auctions using the Dispersive Order

Author

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  • Rene Kirkegaard

    (Department of Economics,University of Guelph)

Abstract

The revenue ranking of asymmetric auctions with two heterogenous bidders is examined. The main theorem identifies a general environment in which the first-price auction is more profitable than the second-price auction. By using mechanism design techniques, the problem is simplified and several extensions are made possible. Roughly speaking, the first-price auction is more profitable when the strong bidder's distribution is flatter and more disperse than the weak bidder's distribution. These sufficient conditions turn out to have appealing geometric and economic interpretations. The theorem applies to certain environments with multi-dimensional types. It is also possible, for the first time, to extend the ranking to auctions with reserve prices and to auctions with more bidders. Implications for contests architecture and other auction formats are also pursued.

Suggested Citation

  • Rene Kirkegaard, 2011. "Ranking Asymmetric Auctions using the Dispersive Order," Working Papers 1101, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2011-01.
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    File URL: http://www.uoguelph.ca/economics/sites/uoguelph.ca.economics/files/2011-01.pdf
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    References listed on IDEAS

    as
    1. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    2. Yeon-Koo Che & Ian Gale, 1998. "Standard Auctions with Financially Constrained Bidders," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(1), pages 1-21.
    3. , & ,, 2006. "Revenue comparisons for auctions when bidders have arbitrary types," Theoretical Economics, Econometric Society, vol. 1(1), pages 95-118, March.
    4. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-86, July.
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    Cited by:

    1. Doni Nicola & Menicucci Domenico, 2013. "Revenue Comparison in Asymmetric Auctions with Discrete Valuations," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 1-33, September.
    2. Mahdi Alimohammadi & Mohammad Hossein Alamatsaz & Erhard Cramer, 2016. "Convolutions and generalization of logconcavity: Implications and applications," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(2), pages 109-123, March.
    3. Shivangi Chandel & Shubhro Sarkar, 2014. "Revenue non-equivalence in multidimensional procurement auctions under asymmetry," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. Hikmet Gunay & Xin Meng & Mark Nagelberg, 2012. "Reserve Price When Bidders are Asymmetric," ISER Discussion Paper 0849, Institute of Social and Economic Research, Osaka University.
    5. Kirkegaard, René, 2014. "Ranking asymmetric auctions: Filling the gap between a distributional shift and stretch," Games and Economic Behavior, Elsevier, vol. 85(C), pages 60-69.

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    More about this item

    Keywords

    Asymmetric Auctions; Convex Transform Order; Dispersive Order; Multi-dimensional types; Revenue Ranking; Star order.;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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