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Decision Analysis: The Right Tool for Auctions

Author

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  • Michael H. Rothkopf

    (Smeal School of Business, Pennsylvania State University, University Park, Pennsylvania 16802)

Abstract

For bidders in standard sealed bid auctions, I believe that decision theory dominates game theory. Even in the design of auctions, decision theory competes well with game theory. This paper explains why I have reached these conclusions.

Suggested Citation

  • Michael H. Rothkopf, 2007. "Decision Analysis: The Right Tool for Auctions," Decision Analysis, INFORMS, vol. 4(3), pages 167-172, September.
    • Handle: RePEc:inm:ordeca:v:4:y:2007:i:3:p:167-172
    DOI: 10.1287/deca.1070.0097
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    References listed on IDEAS

    as
    1. Joseph B. Kadane & Patrick D. Larkey, 1982. "Subjective Probability and the Theory of Games," Management Science, INFORMS, vol. 28(2), pages 113-120, February.
    2. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
    3. Shmuel S. Oren & Michael H. Rothkopf, 1975. "Optimal Bidding in Sequential Auctions," Operations Research, INFORMS, vol. 23(6), pages 1080-1090, December.
    4. Joseph B. Kadane & Patrick D. Larkey, 1982. "Reply to Professor Harsanyi," Management Science, INFORMS, vol. 28(2), pages 124-124, February.
    5. Rothkopf, Michael H & Harstad, Ronald M, 1995. "Two Models of Bid-Taker Cheating in Vickrey Auctions," The Journal of Business, University of Chicago Press, vol. 68(2), pages 257-267, April.
    6. Gail Hohner & John Rich & Ed Ng & Grant Reid & Andrew J. Davenport & Jayant R. Kalagnanam & Ho Soo Lee & Chae An, 2003. "Combinatorial and Quantity-Discount Procurement Auctions Benefit Mars, Incorporated and Its Suppliers," Interfaces, INFORMS, vol. 33(1), pages 23-35, February.
    7. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
    8. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    9. Jules H. van Binsbergen & Leslie M. Marx, 2007. "Exploring Relations Between Decision Analysis and Game Theory," Decision Analysis, INFORMS, vol. 4(1), pages 32-40, March.
    10. Paul Klemperer, 2004. "What Really Matters in Auction Design, from Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice, Princeton University Press.
    11. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    12. Alvin E. Roth & Françoise Schoumaker, 1983. "Note---Subjective Probability and the Theory of Games: Some Further Comments," Management Science, INFORMS, vol. 29(11), pages 1337-1340, November.
    13. Donald L. Keefer & F. Beckley Smith & Harry B. Back, 1991. "Development and Use of a Modeling System to Aid a Major Oil Company in Allocating Bidding Capital," Operations Research, INFORMS, vol. 39(1), pages 28-41, February.
    14. Michael H. Rothkopf, 1983. "Note---Modeling Semirational Competitive Behavior," Management Science, INFORMS, vol. 29(11), pages 1341-1345, November.
    15. Michael H. Rothkopf, 2007. "Thirteen Reasons Why the Vickrey-Clarke-Groves Process Is Not Practical," Operations Research, INFORMS, vol. 55(2), pages 191-197, April.
    16. Theresa Metty & Rob Harlan & Quentin Samelson & Tom Moore & Thomas Morris & Ron Sorensen & Avner Schneur & Olga Raskina & Rina Schneur & Joshua Kanner & Kevin Potts & Jeffrey Robbins, 2005. "Reinventing the Supplier Negotiation Process at Motorola," Interfaces, INFORMS, vol. 35(1), pages 7-23, February.
    17. John C. Harsanyi, 1982. "Rejoinder to Professors Kadane and Larkey," Management Science, INFORMS, vol. 28(2), pages 124-125, February.
    18. Michael H. Rothkopf & Ronald M. Harstad, 1994. "Modeling Competitive Bidding: A Critical Essay," Management Science, INFORMS, vol. 40(3), pages 364-384, March.
    19. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
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