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Auction Design with Loss Averse Bidders: The Optimality of All Pay Mechanisms

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  • Eisenhuth, Roland
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    Abstract

    Auctioneers who have an indivisible object for sale and believe that bidders are risk neutral can find the recipe for an optimal auction in Myerson (1981); auctioneers who believe that bidders are loss averse can find it here: An optimal auction is an all pay auction with minimum bid, and any optimal mechanism is all pay.

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    File URL: http://mpra.ub.uni-muenchen.de/23357/
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    File URL: http://mpra.ub.uni-muenchen.de/34824/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23357.

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    Date of creation: 16 Jun 2010
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    Handle: RePEc:pra:mprapa:23357

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    Keywords: Auctions; Loss Aversion; All Pay Mechanisms; Mechanism Design; Revenue Equivalence;

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    1. Fabian Herweg & Daniel Müller & Philipp Weinschenk, 2010. "Binary Payment Schemes: Moral Hazard and Loss Aversion," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_38, Max Planck Institute for Research on Collective Goods.
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    Cited by:
    1. Kohei Daido & Takeshi Murooka, 2011. "Team Incentives and Reference-Dependent Preferences," Discussion Paper Series 70, School of Economics, Kwansei Gakuin University, revised May 2011.

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