Almost Common Value Auctions
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| Author | : Paul Milgrom |
| Publisher | : Cambridge University Press |
| Total Pages | : 378 |
| Release | : 2004-01-12 |
| Genre | : Business & Economics |
| ISBN | : 1139449168 |
This book provides a comprehensive introduction to modern auction theory and its important new applications. It is written by a leading economic theorist whose suggestions guided the creation of the new spectrum auction designs. Aimed at graduate students and professionals in economics, the book gives the most up-to-date treatments of both traditional theories of 'optimal auctions' and newer theories of multi-unit auctions and package auctions, and shows by example how these theories are used. The analysis explores the limitations of prominent older designs, such as the Vickrey auction design, and evaluates the practical responses to those limitations. It explores the tension between the traditional theory of auctions with a fixed set of bidders, in which the seller seeks to squeeze as much revenue as possible from the fixed set, and the theory of auctions with endogenous entry, in which bidder profits must be respected to encourage participation.
| Author | : John H. Kagel |
| Publisher | : Princeton University Press |
| Total Pages | : 424 |
| Release | : 2009-04-11 |
| Genre | : Business & Economics |
| ISBN | : 1400830133 |
An invaluable account of how auctions work—and how to make them work Few forms of market exchange intrigue economists as do auctions, whose theoretical and practical implications are enormous. John Kagel and Dan Levin, complementing their own distinguished research with papers written with other specialists, provide a new focus on common value auctions and the "winner's curse." In such auctions the value of each item is about the same to all bidders, but different bidders have different information about the underlying value. Virtually all auctions have a common value element; among the burgeoning modern-day examples are those organized by Internet companies such as eBay. Winners end up cursing when they realize that they won because their estimates were overly optimistic, which led them to bid too much and lose money as a result. The authors first unveil a fresh survey of experimental data on the winner's curse. Melding theory with the econometric analysis of field data, they assess the design of government auctions, such as the spectrum rights (air wave) auctions that continue to be conducted around the world. The remaining chapters gauge the impact on sellers' revenue of the type of auction used and of inside information, show how bidders learn to avoid the winner's curse, and present comparisons of sophisticated bidders with college sophomores, the usual guinea pigs used in laboratory experiments. Appendixes refine theoretical arguments and, in some cases, present entirely new data. This book is an invaluable, impeccably up-to-date resource on how auctions work--and how to make them work.
| Author | : Gisèle Umbhauer |
| Publisher | : |
| Total Pages | : |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
In almost common value auctions, even a very small private payoff advantage is usually supposed to have an explosive effect on the outcomes in a second-price sealed-bid common value auction. According to Bikhchandani (1988) and Klemperer (1998) the large set of equilibria obtained for common value auction games drastically shrinks, so that the advantaged player always wins the auction, at a price that sharply decreases the seller's payoff. Yet this result has not been observed experimentally. In this paper, we show that Bikhchandani's equilibria are not the only equilibria of the game. By allowing bids to not continuously depend on private information, we establish a new family of perfect equilibria with nice properties: (i) the advantaged bidder does no longer win the auction regardless of her private information, (ii) she may pay a much higher price than in Bikhchandani's equilibria, (iii) there is no ex-post regret for both the winner and the looser, and (iv) the equilibria give partial support to some naïve behaviour observed experimentally. Moreover the intersection between these equilibria, level-k reasoning and cursed equilibria is not empty.
| Author | : Paul Klemperer |
| Publisher | : |
| Total Pages | : 16 |
| Release | : 1997 |
| Genre | : Auktionstheorie / Übernahme / Fusion / Theorie |
| ISBN | : |
| Author | : Susan L. Rose |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
In almost common value auctions one bidder has a higher (private) value for the item than the other bidders. Theory predicts that even a small private value advantage can have an explosive effect in English auctions, with advantaged bidders always winning and sharp decreases in revenue. These predictions fail to materialize for experienced bidders who have learned to avoid the worst effects of the winner's curse. Bidding is better characterized as proportional, with advantaged bidders tending to bid as in a pure common value auction after adding their private value advantage to their estimated value of the item.
| Author | : Susan L. Rose |
| Publisher | : |
| Total Pages | : 88 |
| Release | : 2006 |
| Genre | : Auctions |
| ISBN | : |
Abstract: In a common value auction, the value of the object for sale is the same to all bidders. In an almost common value auction, one bidder, the advantaged bidder, values the object slightly more than the other, regular bidders. With only two bidders, a slight advantage is predicted to have an explosive effect on the outcome and revenue of an auction. The advantaged bidder always wins and revenue decreases dramatically relative to the pure common value auction. Ascending auctions, which reduce to two bidders, are thought to be particularly vulnerable to the explosive effect, which may discourage entry. My dissertation investigates the explosive effect in experimental English clock auctions. The first essay, "An Experimental Investigation of the Explosive Effect in Almost Common Value Auctions," uses a two-bidder wallet game to test these predictions. I find the effect of an advantage to be proportional, not explosive, confirming past studies. I develop a behavioral model that predicts the proportional effect and test it against the data. The model has two types of bidders: naïve and sophisticated. Naïve bidders use a rule of thumb bidding function while sophisticated bidders are fully rational and account for the probability that a rival is naïve or sophisticated when best responding. I was able to classify subjects as naïve or sophisticated, and those classified as sophisticated do have a better understanding of the game. However, all subjects suffered from the winner's curse, which may have masked the explosive effect and been exacerbated by the structure of the wallet game. The second essay, "Bidding in Almost Common Value Auctions: An Experiment," moves the analysis to a four bidder auction to directly test the entry predictions. I used a more intuitive common value structure and controlled for the winner's curse by using subjects with prior experience in common value auctions. I found that although subjects did not suffer from the winner's curse, there is no evidence of an explosive effect. Advantaged bidders won no more auctions than predicted by chance. Entry and auction revenue were unaffected by the presence of advantaged bidders.
| Author | : Paul Klemperer |
| Publisher | : Princeton University Press |
| Total Pages | : 263 |
| Release | : 2018-06-05 |
| Genre | : Business & Economics |
| ISBN | : 0691186294 |
Governments use them to sell everything from oilfields to pollution permits, and to privatize companies; consumers rely on them to buy baseball tickets and hotel rooms, and economic theorists employ them to explain booms and busts. Auctions make up many of the world's most important markets; and this book describes how auction theory has also become an invaluable tool for understanding economics. Auctions: Theory and Practice provides a non-technical introduction to auction theory, and emphasises its practical application. Although there are many extremely successful auction markets, there have also been some notable fiascos, and Klemperer provides many examples. He discusses the successes and failures of the one-hundred-billion dollar "third-generation" mobile-phone license auctions; he, jointly with Ken Binmore, designed the first of these. Klemperer also demonstrates the surprising power of auction theory to explain seemingly unconnected issues such as the intensity of different forms of industrial competition, the costs of litigation, and even stock trading 'frenzies' and financial crashes. Engagingly written, the book makes the subject exciting not only to economics students but to anyone interested in auctions and their role in economics.
| Author | : David Easley |
| Publisher | : Cambridge University Press |
| Total Pages | : 745 |
| Release | : 2010-07-19 |
| Genre | : Computers |
| ISBN | : 1139490303 |
Are all film stars linked to Kevin Bacon? Why do the stock markets rise and fall sharply on the strength of a vague rumour? How does gossip spread so quickly? Are we all related through six degrees of separation? There is a growing awareness of the complex networks that pervade modern society. We see them in the rapid growth of the internet, the ease of global communication, the swift spread of news and information, and in the way epidemics and financial crises develop with startling speed and intensity. This introductory book on the new science of networks takes an interdisciplinary approach, using economics, sociology, computing, information science and applied mathematics to address fundamental questions about the links that connect us, and the ways that our decisions can have consequences for others.
| Author | : John H. Kagel |
| Publisher | : Princeton University Press |
| Total Pages | : 419 |
| Release | : 2021-04-13 |
| Genre | : Business & Economics |
| ISBN | : 0691218951 |
An invaluable account of how auctions work—and how to make them work Few forms of market exchange intrigue economists as do auctions, whose theoretical and practical implications are enormous. John Kagel and Dan Levin, complementing their own distinguished research with papers written with other specialists, provide a new focus on common value auctions and the "winner's curse." In such auctions the value of each item is about the same to all bidders, but different bidders have different information about the underlying value. Virtually all auctions have a common value element; among the burgeoning modern-day examples are those organized by Internet companies such as eBay. Winners end up cursing when they realize that they won because their estimates were overly optimistic, which led them to bid too much and lose money as a result. The authors first unveil a fresh survey of experimental data on the winner's curse. Melding theory with the econometric analysis of field data, they assess the design of government auctions, such as the spectrum rights (air wave) auctions that continue to be conducted around the world. The remaining chapters gauge the impact on sellers' revenue of the type of auction used and of inside information, show how bidders learn to avoid the winner's curse, and present comparisons of sophisticated bidders with college sophomores, the usual guinea pigs used in laboratory experiments. Appendixes refine theoretical arguments and, in some cases, present entirely new data. This book is an invaluable, impeccably up-to-date resource on how auctions work--and how to make them work.
| Author | : Pak-Sing Choi |
| Publisher | : Springer Nature |
| Total Pages | : 304 |
| Release | : 2021-05-24 |
| Genre | : Business & Economics |
| ISBN | : 3030695751 |
This textbook provides a short introduction to auction theory through exercises with detailed answer keys. Focusing on practical examples, this textbook offers over 80 exercises that predict bidders’ equilibrium behaviour in different auction formats, along with the seller’s strategic incentives to organize one auction format over the other. The book emphasizes game-theoretic tools, so students can apply similar tools to other auction formats. Also included are several exercises based on published articles, with the model reduced to its main elements and the question divided into several easy-to-answer parts. Little mathematical background in algebra and calculus is assumed, and most algebraic steps and simplifications are provided, making the text ideal for upper undergraduate and graduate students. The book begins with a discussion of second-price auctions, which can be studied without using calculus, and works through progressively more complicated auction scenarios: first-price auctions, all-pay auctions, third-price auctions, the Revenue Equivalence principle, common-value auctions, multi-unit auctions, and procurement auctions. Exercises in each chapter are ranked according to their difficulty, with a letter (A-C) next to the exercise title, which allows students to pace their studies accordingly. The authors also offer a list of suggested exercises for each chapter, for instructors teaching at varying levels: undergraduate, Masters, Ph.D. Providing a practical, customizable approach to auction theory, this textbook is appropriate for students of economics, finance, and business administration. This book may also be used for related classes such as game theory, market design, economics of information, contract theory, or topics in microeconomics.
