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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. Marion, Justin, 2007. "Are bid preferences benign? The effect of small business subsidies in highway procurement auctions," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1591-1624, August.
    2. Leandro Arozamena & Estelle Cantillon, 2000. "Investment Incentives in Procurement Auctions," Cowles Foundation Discussion Papers 1276, Cowles Foundation for Research in Economics, Yale University.
    3. 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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    5. 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.
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    8. Simon P. Anderson & Regis Renault, 2001. "Effciency and surplus bounds in Cournot competition," Virginia Economics Online Papers 353, University of Virginia, Department of Economics.
    9. repec:ste:nystbu:06-22 is not listed on IDEAS
    10. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter.
    11. Leonardo Rezende, 2009. "Biased procurement auctions," Economic Theory, Springer, vol. 38(1), pages 169-185, January.
    12. 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.
    13. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    14. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
    15. Andrew Schotter & Allan Corns, 1999. "Can Affirmative Action Be Cost Effective? An Experimental Examination of Price-Preference Auctions," American Economic Review, American Economic Association, vol. 89(1), pages 291-305, March.
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