For an important family of asymmetric auctions, we show that the seller’s expected revenue is higher in the sealed high-bid auction than in the open auction. This is true for any arbitrary numbers of weak and strong buyers. The family has linear equilibrium bidding strategies, and provides a fertile ground for research in asymmetric auctions. We establish many interesting properties of the linear asymmetric auction model. Revenue comparisons for the two auction formats are performed using data observed in U.S. forest timber auctions. By taking realistic parameters fitting the data, and compare the theoretical predictions of the revenues from the two auction formats, we show that the revenue difference is minimal with a fixed number of participants. When the difference in participation is taken into account, the revenue difference predicted by the linear model is quite similar to the empirical results of Athey, Levin and Seira (2004).
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Paper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number
05.26.
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