Auctions in which Losers Set the Price
AbstractWe study auctions of a single asset among symmetric bidders with affiliated values. We show that the second-price auction minimizes revenue among all efficient auction mechanisms in which only the winner pays, and the price only depends on the losers' bids. In particular, we show that the k-th price auction generates higher revenue than the second-price auction, for all k > 2. If rationing is allowed, with shares of the asset rationed among the t highest bidders, then the (t + 1)-st price auction yields the lowest revenue among all auctions with rationing in which only the winners pay and the unit price only depends on the losers' bids. Finally, we compute bidding functions and revenue of the k-th price auction, with and without rationing, for an illustrative example much used in the experimental literature to study first-price, second-price and English auctions.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 845.
Length: 20 pages
Date of creation: 2008
Date of revision:
Auctions ; Second-Price Auction ; English Auction ; k-th Price Auction ; Affiliated Values ; Rationing ; Robust Mechanism Design;
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-CTA-2008-03-08 (Contract Theory & Applications)
- NEP-GTH-2008-03-08 (Game Theory)
- NEP-MKT-2008-03-08 (Marketing)
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