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Revenue comparison in common-value auctions: Two examples

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  • Malueg, David A.
  • Orzach, Ram

Abstract

When players' affiliated values are symmetrically distributed, expected revenue in the second-price auction equals or exceeds that in the first-price auction (Milgrom and Weber, 1982). We provide two common-value examples where this ranking fails when players are asymmetrically informed.

Suggested Citation

  • Malueg, David A. & Orzach, Ram, 2009. "Revenue comparison in common-value auctions: Two examples," Economics Letters, Elsevier, vol. 105(2), pages 177-180, November.
  • Handle: RePEc:eee:ecolet:v:105:y:2009:i:2:p:177-180
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    References listed on IDEAS

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    1. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 413-438.
    2. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    3. Yeon-Koo Che & Ian Gale, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Oxford University Press, vol. 65(1), pages 1-21.
    4. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-646, May.
    5. Engelbrecht-Wiggans, Richard & Milgrom, Paul R. & Weber, Robert J., 1983. "Competitive bidding and proprietary information," Journal of Mathematical Economics, Elsevier, vol. 11(2), pages 161-169, April.
    6. Larson, Nathan, 2009. "Private value perturbations and informational advantage in common value auctions," Games and Economic Behavior, Elsevier, vol. 65(2), pages 430-460, March.
    7. Einy, Ezra & Haimanko, Ori & Orzach, Ram & Sela, Aner, 2002. "Dominance solvability of second-price auctions with differential information," Journal of Mathematical Economics, Elsevier, vol. 37(3), pages 247-258, May.
    8. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-392, June.
    9. Che, Yeon-Koo & Gale, Ian, 2006. "Revenue comparisons for auctions when bidders have arbitrary types," Theoretical Economics, Econometric Society, vol. 1(1), pages 95-118, March.
    10. Robert B. Wilson, 1967. "Competitive Bidding with Asymmetric Information," Management Science, INFORMS, vol. 13(11), pages 816-820, July.
    11. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
    12. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
    13. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    14. M. Weverbergh, 1979. "Note--Competitive Bidding with Asymmetric Information Reanalyzed," Management Science, INFORMS, vol. 25(3), pages 291-294, March.
    15. Holt, Charles A, Jr, 1980. "Competitive Bidding for Contracts under Alternative Auction Procedures," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 433-445, June.
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    Cited by:

    1. Ezra Einy & Mridu Prabal Goswami & Ori Haimanko & Ram Orzach & Aner Sela, 2017. "Common-value all-pay auctions with asymmetric information," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(1), pages 79-102, March.
    2. Matros, Alexander & Possajennikov, Alex, 2016. "Tullock contests may be revenue superior to auctions in a symmetric setting," Economics Letters, Elsevier, vol. 142(C), pages 74-77.
    3. Ezra Einy & Ori Haimanko & Diego Moreno & Aner Sela & Benyamin Shitovitz, 2013. "Tullock Contests With Asymmetric Information," Working Papers 1303, Ben-Gurion University of the Negev, Department of Economics.
    4. Ezra Einy & Ori Haimanko & Ram Orzach & Aner Sela, 2016. "Common-value all-pay auctions with asymmetric information and bid caps," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(1), pages 63-88, March.
    5. Aner Sela & Ezra Einy & 0ri Haimanko & Diego Moreno & Avishay Aiche & Benyamin Shitovitz, 2016. "Information Advantage in Common-Value Classic Tullock Contests," Working Papers 1614, Ben-Gurion University of the Negev, Department of Economics.
    6. David Malueg & Ram Orzach, 2012. "Equilibrium and revenue in a family of common-value first-price auctions with differential information," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(2), pages 219-254, May.
    7. Alexander Matros & Alex Possajennikov, 2014. "Common Value Allocation Mechanisms with Private Information: Lotteries or Auctions?," Discussion Papers 2014-07, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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