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Auction Design with Loss Averse Bidders: The Optimality of All Pay Mechanisms

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  • Eisenhuth, Roland

Abstract

Auctioneers who have an indivisible object for sale and believe that bidders are risk neutral can find the recipe for an optimal auction in Myerson (1981); auctioneers who believe that bidders are loss averse can find it here: An optimal auction is an all pay auction with minimum bid, and any optimal mechanism is all pay.

Suggested Citation

  • Eisenhuth, Roland, 2010. "Auction Design with Loss Averse Bidders: The Optimality of All Pay Mechanisms," MPRA Paper 23357, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23357
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    References listed on IDEAS

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    Cited by:

    1. Kohei Daido & Takeshi Murooka, 2016. "Team Incentives and Reference‐Dependent Preferences," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(4), pages 958-989, December.
    2. Jong-Hee Hahn & Jinwoo Kim & Sang-Hyun Kim & Jihong Lee, 2018. "Price discrimination with loss averse consumers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 681-728, May.
    3. Dato, Simon & Grunewald, Andreas & Müller, Daniel & Strack, Philipp, 2017. "Expectation-based loss aversion and strategic interaction," Games and Economic Behavior, Elsevier, vol. 104(C), pages 681-705.
    4. Carbajal, Juan Carlos & Ely, Jeffrey C., 2013. "Mechanism design without revenue equivalence," Journal of Economic Theory, Elsevier, vol. 148(1), pages 104-133.
    5. Ott, Marion & Ehrhart, Karl-Martin, 2014. "Reference-Dependent Bidding in Dynamic Auctions," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100591, Verein für Socialpolitik / German Economic Association.
    6. Dato, Simon & Grunewald, Andreas & Müller, Daniel, 2015. "Expectation-Based Loss Aversion and Strategic Interaction," Bonn Econ Discussion Papers 02/2015, University of Bonn, Bonn Graduate School of Economics (BGSE).
    7. Dato, Simon & Müller, Daniel & Grunewald, Andreas, 2015. "Expectation-Based Loss Aversion and Strategic Interaction," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112947, Verein für Socialpolitik / German Economic Association.
    8. von Wangenheim, Jonas, 2017. "English versus Vickrey Auctions with Loss Averse Bidders," Rationality and Competition Discussion Paper Series 48, CRC TRR 190 Rationality and Competition.

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    More about this item

    Keywords

    Auctions; Loss Aversion; All Pay Mechanisms; Mechanism Design; Revenue Equivalence;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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