Utility Equivalence in Sealed Bid Auctions and the Dual Theory of Choice Under Risk
AbstractThis paper analyzes symmetric, single item auctions in the private values framework, with buyers whose preferences satisfy the axioms of Yaari's (1987) dual theory of choice under risk. It is shown that when their valuations are independently and identically distributed, buyers are indifferent among all the auctions contained in a big family of mechanisms which includes the standard auctions. It is also shown that in the linear equilibria of the sealed bid double auction, as the degree of players' risk aversion grows arbitrarily large, the ex post inefficiency of the mechanism tends to vanish.
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Bibliographic InfoPaper provided by Oscar Volij in its series Economic theory and game theory with number 009.
Date of creation: 05 Mar 1999
Date of revision: 25 Mar 1999
Publication status: Published in Economics Letters, 76(2), 231--237, 2002
Contact details of provider:
Postal: Oscar Volij, Department of Economics, Ben-Gurion University, Beer-Sheva 84105, Israel
Web page: http://volij.co.il/
Other versions of this item:
- Oscar Volij, 1999. "Utility Equivalence in Sealed Bid Auctions and the Duel Theory of Choice Under Risk," Working Papers 99-8, Brown University, Department of Economics.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-03-15 (All new papers)
- NEP-MIC-1999-03-15 (Microeconomics)
- NEP-POL-1999-03-15 (Positive Political Economics)
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- Volij, Oscar & Winter, Eyal, 2002.
"On risk aversion and bargaining outcomes,"
Games and Economic Behavior,
Elsevier, vol. 41(1), pages 120-140, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oscar Volij).
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