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Robust auctions with affiliated private values

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  • Yangwei Song

    (University of Colorado Boulder)

Abstract

We study auctions in an affiliated private value framework in which buyers face ambiguity over the distribution of the others’ valuations and make choices that are robust to that ambiguity. We show that, in contrast to the Bayesian case, a first-price auction can generate a higher revenue than a second-price auction in the presence of ambiguity. We also extend this insight to large double auctions. In particular, we propose a pay-as-bid double auction mechanism and demonstrate that given any nontrivial amount of ambiguity, this mechanism implements the efficient trade and is ex-post budget balanced with probability one as the market size grows.

Suggested Citation

  • Yangwei Song, 2025. "Robust auctions with affiliated private values," Review of Economic Design, Springer;Society for Economic Design, vol. 29(2), pages 245-279, June.
    • Handle: RePEc:spr:reecde:v:29:y:2025:i:2:d:10.1007_s10058-024-00354-0
    DOI: 10.1007/s10058-024-00354-0
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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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