IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v7y2007i1n40.html
   My bibliography  Save this article

Auctions with Opportunistic Experts

Author

Listed:
  • Basov Suren

    (La Trobe University, s.basov@latrobe.edu.au)

  • Danilkina Svetlana

    (Melbourne University, sdanilki@unimelb.edu.au)

Abstract

In this paper we revisit the first price and the second price sealed-bid auctions, but, unlike the standard model, we assume that bidding is conducted by an expert on behalf of the client, and that the client does not completely trust the expert's qualifications. In particular, if the client does not win the auction, but could have won it by submitting a bid below her valuation or won but feels she could have paid less for the object, the client asks the expert to justify the strategy. The objective of this paper is to incorporate the concern for the justifiability into the expert's objective function. We show that under some assumptions about the justification process the requirement of justifiability increases the optimal bid in the first price sealed-bid auction, while bidding the client's true value remains the optimal strategy in the second price auction sealed-bid auction. Hence, the first price auction may raise more revenue than the second price auction and thus it will be preferred by the seller. Both auctions allocate the good to the client with the highest valuation. However, the second price sealed-bid auction is more efficient, since the experts do not incur costs from the failure to justify their strategies.

Suggested Citation

  • Basov Suren & Danilkina Svetlana, 2007. "Auctions with Opportunistic Experts," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-11, November.
  • Handle: RePEc:bpj:bejtec:v:7:y:2007:i:1:n:40
    DOI: 10.2202/1935-1704.1350
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1704.1350
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    File URL: https://libkey.io/10.2202/1935-1704.1350?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ran Spiegler, 2002. "Equilibrium in Justifiable Strategies: A Model of Reason-based Choice in Extensive-form Games," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 691-706.
    2. Stephanie Rosenkranz & Patrick W. Schmitz, 2007. "Reserve Prices in Auctions as Reference Points," Economic Journal, Royal Economic Society, vol. 117(520), pages 637-653, April.
    3. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, Decembrie.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beker, Pablo F. & Cuevas, Conrado, 2018. "The social value of information in economies with mandatory savings," The Warwick Economics Research Paper Series (TWERPS) 1152, University of Warwick, Department of Economics.
    2. Rui Nuno Baleiras & José da Silva Costa, 2003. "To Be or Not To Be in Office Again: Political Business Cycles with Local Governments," Public Economics 0302009, University Library of Munich, Germany.
    3. Wright, Austin L. & Sonin, Konstantin & Driscoll, Jesse & Wilson, Jarnickae, 2020. "Poverty and economic dislocation reduce compliance with COVID-19 shelter-in-place protocols," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 544-554.
    4. Jolian McHardy & Michael Reynolds & Stephen Trotter, 2012. "The Stackelberg Model as a Partial Solution to the Problem of Pricing in a Network," Working Paper series 19_12, Rimini Centre for Economic Analysis.
    5. Atmaca Sümeyra & Camboni Riccardo & Podkolzina Elena & Schoors Koen & Valbonesi Paola, 2025. "Setting Reserve Prices in Repeated Procurement Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 25(2), pages 283-303.
    6. Gregory Casey & Ryo Horii, 2024. "A Generalized Uzawa Growth Theorem," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 2(2), pages 336-373.
    7. Lin, Xiaoji, 2012. "Endogenous technological progress and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 103(2), pages 411-427.
    8. Don Fullerton & Chi L. Ta, 2017. "Public Finance in a Nutshell: A Cobb Douglas Teaching Tool for General Equilibrium Tax Incidence and Excess Burden," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(1), pages 155-170, March.
    9. von Siemens, Ferdinand A. & Kosfeld, Michael, 2014. "Team production in competitive labor markets with adverse selection," European Economic Review, Elsevier, vol. 68(C), pages 181-198.
    10. Ricardo Ribeiro & João Vareda, 2007. "Crowding Out or Complementarity in the Telecommunications Market?," Working Papers 07-33, NET Institute, revised Sep 2007.
    11. Alastaire S na ALINSATO, 2015. "Economic Valuation of Electrical Service Reliability for Households in Developing Country: A Censored Random Coefficient Model Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 352-359.
    12. Janvier D. Nkurunziza, 2005. "Reputation and Credit without Collateral in Africa`s Formal Banking," Economics Series Working Papers WPS/2005-02, University of Oxford, Department of Economics.
    13. Kazuhiro Kurose, 2023. "The microfoundations of evolutionary economics and its future: an essay based on the SMT approach," Evolutionary and Institutional Economics Review, Springer, vol. 20(2), pages 457-481, September.
    14. Kasy, Maximilian, 2018. "Optimal taxation and insurance using machine learning — Sufficient statistics and beyond," Journal of Public Economics, Elsevier, vol. 167(C), pages 205-219.
    15. Pizer, William A. & Kopp, Raymond, 2005. "Calculating the Costs of Environmental Regulation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 25, pages 1307-1351, Elsevier.
    16. Ho Geun Jang & Satoshi Yamazaki & Eriko Hoshino, 2019. "Profit and equity trade‐offs in the management of small pelagic fisheries: the case of the Japanese sardine fishery," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(3), pages 549-574, July.
    17. Wang, Pu & Poe, Gregory L. & Wolf, Steven A., 2017. "Payments for Ecosystem Services and Wealth Distribution," Ecological Economics, Elsevier, vol. 132(C), pages 63-68.
    18. Bruno Ferreira Frascaroli & Luciano da Costa Silva & Osvaldo Cândido da Silva Filho, 2009. "Ratings of Sovereign Risk and the Macroeconomics Fundamentals of the countries: a Study Using Artificial Neural Networks," Brazilian Review of Finance, Brazilian Society of Finance, vol. 7(1), pages 73-106.
    19. Antonio Cabrales & Olivier Gossner & Roberto Serrano, 2013. "Entropy and the Value of Information for Investors," American Economic Review, American Economic Association, vol. 103(1), pages 360-377, February.
    20. Houba, Harold & van der Laan, Gerard & Zeng, Yuyu, 2014. "Asymmetric Nash Solutions in the River Sharing Problem," Strategic Behavior and the Environment, now publishers, vol. 4(4), pages 321-360, December.

    More about this item

    Keywords

    auctions; experts; efficiency;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:7:y:2007:i:1:n:40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.