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Utility Equivalence in Sealed Bid Auctions and the Dual Theory of Choice Under Risk

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Author Info

  • Oscar Volij

    (Department of Economics, Brown University, and Department of Economics, Hebrew University of Jerusalem.)

Abstract

This 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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File URL: http://volij.co.il/publications/papers/auct3.pdf
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Bibliographic Info

Paper provided by Oscar Volij in its series Economic theory and game theory with number 009.

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Date of creation: 05 Mar 1999
Date of revision: 25 Mar 1999
Publication status: Published in Economics Letters, 76(2), 231--237, 2002
Handle: RePEc:nid:ovolij:009

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Postal: Oscar Volij, Department of Economics, Ben-Gurion University, Beer-Sheva 84105, Israel
Web page: http://volij.co.il/

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Web: http://volij.co.il/addr.html

Related research

Keywords: Auctions; non-expected utility; risk aversion.;

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Cited by:
  1. Volij, Oscar & Winter, Eyal, 2002. "On risk aversion and bargaining outcomes," Games and Economic Behavior, Elsevier, vol. 41(1), pages 120-140, October.

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