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Auction design with data-driven misspecifications: inefficiency in private value auctions with correlation

Author

Listed:
  • Jehiel, Philippe

    (Department of Economics, PSE and UCL)

  • Mierendorff, Konrad

    (Department of Economics, University College London)

Abstract

We study the existence of efficient auctions in private value settings in which some bidders form their expectations about the distribution of their competitor’s bids based on the accessible data from past similar auctions consisting of bids and ex post values. We consider steady-states in such environments with a mix of rational and data-driven bidders, and we allow for correlation across bidders in the signal distributions about the ex post values. After reviewing the working of the approach in second-price and first-price auctions, we show our main result that there is no efficient auction in such environments.

Suggested Citation

  • Jehiel, Philippe & Mierendorff, Konrad, 2024. "Auction design with data-driven misspecifications: inefficiency in private value auctions with correlation," Theoretical Economics, Econometric Society, vol. 19(4), November.
    • Handle: RePEc:the:publsh:5655
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    References listed on IDEAS

    as
    1. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
    2. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-883, December.
    3. Gizatulina, Alia & Hellwig, Martin, 2017. "The generic possibility of full surplus extraction in models with large type spaces," Journal of Economic Theory, Elsevier, vol. 170(C), pages 385-416.
    Full references (including those not matched with items on IDEAS)

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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
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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