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Near-optimality of second price mechanisms in a class of asymmetric auctions

  • Mares, Vlad
  • Swinkels, Jeroen M.
Registered author(s):

    Consider a setting with n sellers having i.i.d. costs with log-concave density f from cumulative F, and a buyer who puts a premium [Delta]i on procuring from seller i. We show how for any given [Delta]1,...,[Delta]n, a simple second price bonus auction can be chosen which comes surprisingly close to giving the auctioneer the same surplus as an optimal mechanism. The bonuses depend only on the magnitude and monotonicity of the slope of virtual costs given F. We show that these in turn depend only on fairly coarse information about F. We explore how this result generalizes to asymmetrically distributed costs.

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    File URL: http://www.sciencedirect.com/science/article/B6WFW-50X2NGX-1/2/ae2dedac13f4fe9541ce47448bfa0dee
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    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 72 (2011)
    Issue (Month): 1 (May)
    Pages: 218-241

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    Handle: RePEc:eee:gamebe:v:72:y:2011:i:1:p:218-241
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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    1. Leandro Arozamena & Estelle Cantillon, 2000. "Investment Incentives in Procurement Auctions," Cowles Foundation Discussion Papers 1276, Cowles Foundation for Research in Economics, Yale University.
    2. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
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    5. Simon P. Anderson & Régis Renault, 2001. "Efficiency and surplus bounds in Cournot competition," Virginia Economics Online Papers 360, University of Virginia, Department of Economics.
    6. Cabral, Luis M B & Greenstein, Shane, 1990. "Switching Costs and Bidding Parity in Government Procurement of Computer Systems," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 453-69, Fall.
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    8. Justin Marion, 2009. "How Costly Is Affirmative Action? Government Contracting and California's Proposition 209," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 503-522, August.
    9. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
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    12. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics.
    13. John Asker & Estelle Cantillon, 2008. "Properties of Scoring Auctions," ULB Institutional Repository 2013/172674, ULB -- Universite Libre de Bruxelles.
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    15. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter.
    16. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
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