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Simultaneous Pooled Auctions

Author

Listed:
  • Flavio Menezes

    (Australian National University)

  • Paulo Klinger Monteiro

    (IMPA/CORE)

Abstract

Suppose a seller wants to sell $k$ similar or identical objects and there are $n>k$ potential buyers. Suppose that buyers want only one object. (This is a reasonable assumption in the sale of condominiums or in the sale of government-owned residential units to low-income families). In this case, we suggest the use of a simultaneous auction that would work as follows. Players are asked to submit sealed bids for one object. The individual with the highest bid chooses an object first; the individual with the second highest bid chooses the next object; and this process continues until the individual with the $k^{th}$ highest bid receives the last object. Each individual pays the equivalent to his/her bid. When objects are identical, we show that the proposed auction generates the same revenue as a first-price sealed-bid sequential auction. When objects are perfectly correlated, there is no known solution for sequential auctions, whereas we can characterize bidding strategies for the proposed pooled auctions. Moreover, the pooled auction is optimal since it satisfies a straightforward generalization of the revelation principle (Myerson, 1981) to $k$ perfectly correlated objects. Thus, if the first-price sequential auction is optimal then it generates the same revenue as the pooled auctions. Otherwise, it generates less revenue. Therefore, the first- price sequential auction generates at most as much revenue than the pooled auction for identical and perfectly correlated objects. In addition, the pooled auction may be easier and cheaper to run, and bidders' strategies are simpler to compute since there are no interdependencies between sales as in the case of sequential auctions, i.e., the strategy space is smaller.

Suggested Citation

  • Flavio Menezes & Paulo Klinger Monteiro, 1996. "Simultaneous Pooled Auctions," Microeconomics 9611001, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:9611001
    Note: Type of Document - Latex; prepared on PC-TEX; to print on HP laserjet; pages: 17 ; figures: none
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    References listed on IDEAS

    as
    1. Flavio Menezes & Paulo Monteiro, 1997. "Sequential asymmetric auctions with endogenous participation," Theory and Decision, Springer, vol. 43(2), pages 187-202, September.
    2. Gale Ian L. & Hausch Donald B., 1994. "Bottom-Fishing and Declining Prices in Sequential Auctions," Games and Economic Behavior, Elsevier, vol. 7(3), pages 318-331, November.
    3. Mayer Christopher J., 1995. "A Model of Negotiated Sales Applied to Real Estate Auctions," Journal of Urban Economics, Elsevier, vol. 38(1), pages 1-22, July.
    4. Gale, I. & Hausch, D., 1992. "Bottom-Fishing and Declining Prices in Sequential Auctions," Working papers 9215, Wisconsin Madison - Social Systems.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Salmon, Timothy C. & Iachini, Michael, 2007. "Continuous ascending vs. pooled multiple unit auctions," Games and Economic Behavior, Elsevier, vol. 61(1), pages 67-85, October.
    2. Page Jr., Frank H., 1998. "Existence of optimal auctions in general environments," Journal of Mathematical Economics, Elsevier, vol. 29(4), pages 389-418, May.
    3. Kfir Eliaz, 2003. "Creating competition out of thin air: Market thickening and right-to-choose auctions," Theory workshop papers 658612000000000047, UCLA Department of Economics.
    4. Maarten C. W. Janssen & Vladimir A. Karamychev & Emiel Maasland, 2010. "Simultaneous Pooled Auctions with Multiple Bids and Preference Lists," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 286-298, June.
    5. Sander Renes, 2011. "Balancing the Bids, Solutions for Unit Price Auctions," Tinbergen Institute Discussion Papers 11-047/1, Tinbergen Institute.
    6. Jonathan E. Alevy & Julianna Butler & Michael Price, 2016. "Multi-good Demand in Bidder's Choice Auctions: Experimental Evidence from the Lab and the Field," Working Papers 2016-01, University of Alaska Anchorage, Department of Economics.
    7. Juan Feng, 2008. "—Optimal Mechanism for Selling a Set of Commonly Ranked Objects," Marketing Science, INFORMS, vol. 27(3), pages 501-512, 05-06.
    8. Yuen Leng Chow & Joseph T.L. Ooi, 2014. "First-Price Sealed-Bid Tender versus English Open Auction: Evidence from Land Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(2), pages 253-278, June.
    9. Burguet, Roberto, 2007. "Right to choose in oral auctions," Economics Letters, Elsevier, vol. 95(2), pages 167-173, May.
    10. Eliaz, Kfir & Offerman, Theo & Schotter, Andrew, 2008. "Creating competition out of thin air: An experimental study of right-to-choose auctions," Games and Economic Behavior, Elsevier, vol. 62(2), pages 383-416, March.
    11. Juan Feng, 2004. "Optimal Allocation Mechanisms When Bidders Ranking for the objects is common," Econometric Society 2004 North American Summer Meetings 545, Econometric Society.

    More about this item

    Keywords

    Simultaneous auctions; Revenue-equivalence; Condominium auctions.;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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