Essays on Information Disclosure and Auction Theory

Essays on Information Disclosure and Auction Theory
Author: Shota Ichihashi
Publisher:
Total Pages:
Release: 2018
Genre:
ISBN:

This dissertation consists of three essays on information economics and auction theory. The first chapter studies the question of what information consumers should disclose to firms. A consumer discloses information to a multi-product firm, which learns about his preferences, sets prices, and makes product recommendations. While the consumer benefits from disclosure as it enables the firm to make accurate recommendations, the firm may use the information to price discriminate. I show that the firm prefers to commit to not price discriminate, which encourages the consumer to provide information that is useful for product recommendations. However, nondiscriminatory pricing hurts the consumer, who would be better off by precommitting to withhold some information. In contrast to single-product models, equilibrium is typically inefficient even if the consumer can disclose any information about his preferences. The second chapter studies the problem of restricting the information available to the sender in a game of strategic communication. Assuming that the receiver has a binary choice, I characterize the "optimal information restriction, " which maximizes the equilibrium payoff of the receiver among all the information restrictions for the sender. The final chapter studies the optimal timing of an auction in a setting where bidders arrive and depart stochastically over time. First, we compare the revenue-maximizing timing and welfare-maximizing timing. We show that sellers hold auctions too late or too early whenever (censored at 0) virtual values are more or less right-skewed than values. In particular, we show that sellers typically hold auctions inefficiently late. Second, we prove that the use of simple timing rules (i.e., a fixed deadline chosen in advance) can lose an arbitrarily large fraction of the revenue from the optimal stopping rule.

Three Essays on Auction Theory

Three Essays on Auction Theory
Author: Xiaoshu Xu
Publisher:
Total Pages: 63
Release: 2011
Genre:
ISBN:

Abstract: My dissertation consists of three chapters in theoretical auction analysis. The first chapter considers optimal sequential auctions with new bidders arriving in each period. The second chapter examines how resale affects bidding strategies and auction outcomes in an auction environment with costly entry. The third chapter investigates how resale affects bidding strategies and auction outcomes in a sequential auction setting where the values of items auctioned in different periods exhibit synergies. The first chapter gives a full characterization of the optimal sequential second-price (or ascending English) auctions with sequentially arriving bidders. There are n bidders in the first period and m new bidders arrive in the second period. Based on the auctioneer's commitment power, we study two cases: full commitment and noncommitment. In both cases, we establish the existence of a symmetric equilibrium characterized by a threshold strategy - -a bidder does not bid in the first auction when her valuation is below this threshold and bids according to an increasing function otherwise. In the noncommitment case, the auctioneer chooses an optimal reserve price to maximize the expected revenue from the second period; thus her decision of whether to include previous bidders as potential buyers is endogenously determined by the reserve price in the first auction. This might create multiple equilibria depending on the beliefs of the auctioneer and the bidders. We apply a fairly intuitive rule to establish the uniqueness. We also extend our analysis to allow for opportunities for resale, where the winner in the first auction can opt to resell the item to new bidders. The second chapter, joint with Dan Levin and Lixin Ye, studies how resale affects auctions with costly entry in a model where an arbitrary number of bidders possess two-dimensional private information signals: entry costs and valuations. We establish the existence of symmetric entry equilibrium and identify sufficient conditions under which the equilibrium is unique. Our analysis suggests that the opportunity of resale induces motivation for both speculative entry and bargain hunting abstentions. By following the uniform distribution for numerical analysis, our results suggest that while the entry probability and efficiency are always higher when resale is allowed, the auctioneer's expected revenue is lower when resale is allowed for almost all parameter values. We also compare this model to one where bidders may follow "strong" or "weak" distributions in terms of valuations. The third chapter, joint with Dan Levin and Lixin Ye, studies a sequential second-price auction of two objects with two bidders, where the winner of the package obtains a synergy from the second object. If reselling after the two auctions occurs, it proceeds as either monopoly or monopsony take-it-or-leave-it offer. I find that a post-auction resale has a significant impact on bidding strategies in the auctions. When seller makes a take-it-or-leave-it offer in resale, there is no equilibrium where at least one bidder reveals her type with positive probability. When buyer makes the offer instead, there exist symmetric increasing equilibrium strategies for both items. While allowing resale always improves efficiency, I demonstrate that the effect of resale is ambiguous on expected revenue as Ill as the probability of exposure. I also extend this model to allow for three bidders and provide the equilibrium analysis.

Essays on Market Design and Auction Theory

Essays on Market Design and Auction Theory
Author: Seungwon (Eugene) Jeong
Publisher:
Total Pages:
Release: 2015
Genre:
ISBN:

This dissertation consists of three essays on market design and auction theory. In Chapter 1, I introduce new multidimensional auction mechanisms. In many auctions, because of externalities, each bidder has a different maximum willingness to pay in order to beat each specific competitor, which causes the following new problem. When there are three bidders, two bidders might compete against each other unnecessarily and have worse payoffs than if they had lost to the third bidder, i.e., the two bidders have "group winner regret, " which can also lead to inefficiency. While no one-dimensional-bid mechanism is efficient, the Vickrey-Clarke-Groves (VCG) may require losers to pay. This paper introduces a novel mechanism, the "multidimensional second-price" (MSP) auction (and its open ascending version), and characterizes it. MSP is free of a loser's payment, pairwise stable, and has good incentive properties, including no group winner regret. Moreover, the winner cannot win at any different price by any misreport, and a loser cannot be better off winning by any misreport. MSP is strategyproof for a bidder without externalities imposed by others, and it reduces to the second-price auction when there are no externalities. Simulations suggest that MSP outperforms the second-price auction in terms of both revenue and efficiency. In Chapter 2, I study properties of VCG when externalities exist, and introduce shill bidding strategies that weakly dominate truthful bidding. When externalities exist, VCG is efficient, incentive compatible, and individually rational. However, as occurs in package auctions without externalities, VCG outcomes may not be in the core. Moreover, VCG is not pairwise stable. Due to externalities, several additional problems occur. VCG may require losing bidders to pay, which might be undesirable. Also, it might be budget infeasible, and the auctioneer might need to pay the winner a subsidy. The subsidy problem can occur even when all bids are positive. Furthermore, unlike package auctions without externalities, there exists a shill bidding strategy that weakly dominates truthful bidding. In addition, when this shill bidding is used, there is no Nash equilibrium. Each bidder is better off using an infinite number of shills, which eventually makes VCG undefined. In Chapter 3, I study properties of VCG in the advertising auction setting. Even though VCG is incentive compatible (IC) in the advertising auction setting, the actual implementation of VCG in practice is not VCG per se. The main reason is that the price needs to be determined when the billing event happens at the same time as the estimation of click-through rate (CTR) or position discount (PD) is occurring. After all, advertising auctions charge the estimate of externalities. However, even in this "estimated" VCG (eVCG), CTR miscalibration does not ruin IC. Even when PD miscalibration exists, IC still holds with "perfect competition." Regarding efficiency and revenue, both CTR and PD miscalibrations matter. Interestingly, however, the revenue of the auctioneer does not necessarily decrease by underbidding.

Auction Theory

Auction Theory
Author: Vijay Krishna
Publisher: Academic Press
Total Pages: 319
Release: 2002-03-13
Genre: Business & Economics
ISBN: 012426297X

"Vijay Krishna's book provides a very thorough and patient presentation of auction theory, starting from the most basic analysis and graduating to sophisticated, state of the art theory, including multi-unit auctions. This book covers a very wide range of auction topics, providing a clear and accessible treatment. The theory is presented in a careful and easily understood style accessible to honors undergraduates as well as all economics graduate students. Krishna's book will certainly become the central book on auction theory." --R. Preston McAfee, Murray S. Johnson Chair in Economics, University of Texas "This book not only sets out much of the theoretical literature on auctions-including results that are very recent-but does so with a clarity, elegance, and rigor that is characteristic of Vijay Krishna's work." --Eric Maskin, A.O. Hirschman Professor of Social Science, Institute for Advanced Study, Princeton, New Jersey "The book gives a superb presentation of auction theory, with clear and concise proofs of all results. It is essential reading for any serious student of auctions." --Peter Cramton, Professor of Economics, University of Maryland "This is the book we have been waiting for: a high level treatment of auction theory that carefully presents the technical details necessary for an in depth understanding of the main themes of auction theory, ideal as a basis for a graduate course, and by an author who has himself made important contributions to the subject." --Paul Klemperer, Edgeworth Professor of Economics, Nuffield College, University of Oxford, United Kingdom Through accessible, detailed examinations of themes central to auction theory, Vijay Krishna explores auctions and competitive bidding as games of incomplete information. His results on bidding strategies, efficiency, and revenue maximization and his clear proofs for each proposition make this book both the standard reference on auctions and the first source of authoritative information about multiunit auctions. Well organized and featuring straightforward intuition, Auction Theory's depth and breadth lay bare the complexity and utility of this growing field.

Sponsored Search and Sequential Auctions

Sponsored Search and Sequential Auctions
Author: Emmanuel Lorenzon
Publisher:
Total Pages: 0
Release: 2016
Genre:
ISBN:

This thesis is a collection of three essays in theoretical auction analysis. Chapter 1 considersbid delegation in the GSP auction mechanism. In a game involving side-contracts and a compensationpolicy set by an agency, the first-best collusive outcome is achieved. We offer a characterization of the implementablebid profiles for the two-position game with three players. Chapter 2 considers the sequentialsale of an object to two buyers: one knows his private information and the other buyer does not. Buyershave a multi-unit demand and private valuations for each unit are perfectly correlated. An asymmetricequilibrium exists when the uninformed player adopts an aggressive bidding strategy. Conversely, hisinformed opponent behaves more conservatively by using bid shading. The bidding behaviour of theuninformed bidder is driven by the opportunity to learn his private valuation for free. This dynamic is atthe root of the decline in the equilibrium price across both sales. In chapter 3, information is observableduring the first-stage auction in a sequential-move game in which the first-mover bidder is observed byhis opponent. A separating equilibrium exists in which the informed bidder bids aggressively when he isthe first-mover which entails a non-participation strategy from his uninformed competitor. Conversely,the latter adopts a conservative behaviour when he is the first-mover. A pooling equilibrium in which theinformed bidder blurs his valuation can only exist if his uninformed opponent adopts a non-participatingstrategy.

Essays on Value Distributions in All-pay Auctions

Essays on Value Distributions in All-pay Auctions
Author: Suat Akbulut
Publisher:
Total Pages:
Release: 2021
Genre:
ISBN:

This dissertation consists of three chapters. The first chapter studies the value distribution adoption choice of a player when she competes against an incumbent in an all-pay auction setting. The second chapter analyzes how much would a player like to learn about her own valuation in a similar setting. Lastly, the third chapter analyzes the best information disclosure policy that an auctioneer can adopt according to different performance measures in a two-player two-stage all-pay auction setting, where the players choose their value distributions in the first stage. The first chapter considers a two-player all-pay auction setting and modifies it by adding a technology-adoption stage at the beginning of the game. In a discrete valuations environment, assuming one player's valuation is common knowledge, we allow the other player (informed) to pick a distribution over the valuation space. Her opponent (uninformed) observes her choice of distribution. However, her valuation is privately drawn according to this distribution. The two players then play an asymmetric all-pay auction. We show that in such a setting, the informed player adopts a distribution that assigns positive probabilities to at most two elements; that will always contain the supremum, and sometimes, the infimum of the set of available values. She pools the extreme values in order to create an information asymmetry, which then would make the uninformed player bid less aggressively. We later impose a mean condition on the distribution that the informed player could pick and observe that she still prefers to split the probability mass on in-between values to the extreme ones. As a result, she picks the same support but arranges the probability mass on these values to meet the mean condition. In other words, the informed player is first interested in including only the extreme values in the support of her value distribution, and then the probabilities assigned to those values. The second chapter assumes that the informed player's value distribution is common knowledge and that she cannot observe her realized value. However, she can acquire additional information about her realized value by adopting a learning experiment. She picks such an experiment in the first stage. Even though her choice of experiment is observed by the uninformed player, she privately learns the realization of the experiment. Then, they play an all-pay auction in the second stage of the game. Every learning experiment induces a posterior probability distribution over the convex hull of the set of available values. The informed player bids as if her value is drawn from this posterior distribution, where she privately observes her value. Therefore, her problem boils down to choosing a posterior distribution that stochastically dominates the prior in the second-order sense. We show that the informed player's motivation to split the probability mass on in-between types to the extreme types is still present. However, due to the distributional constraints, she will pick a fully informative experiment to learn her value as long as it does not result in her two lowest values bidding zero with a positive probability in the equilibrium of the all-pay auction stage. If that is the case, she would try to mimic the prior distribution for the high types, who will never bid zero, and allocate the remaining probability to only one type to meet the constraint. One natural extension of our analysis is studying the equilibrium value distribution profiles when both players are choosing their own value distribution. When the possible values are only high and low, we show that the profile in which one player picks the high value with probability one while the other player assigns probability half to each values is the unique (up to symmetry) value distribution profile. Moreover, when we consider any set of values, we show that the profile in which one player picks the highest value with probability one, while the other player assigns probability half to the highest and the lowest values each is an equilibrium value distribution profile. Due to the lack of an analytical approach to the equilibrium bidding distributions of the all-pay auctions in an asymmetric information environment, checking whether this equilibrium is unique is left as future work. The last chapter analyzes the best information disclosure policy that an auctioneer can adopt according to different performance measures, namely players' payoff, prize allocation efficiency, and aggregate effort. The significant contribution of the analysis is that players have the ability to choose the distribution from which their own types are drawn. Using a two-player all-pay auction with the two-type setting, we show that the optimal disclosure policy depends on the ratio of the value of winning for a low type to the value of winning for a high type.

Essays on Market Design and Auction Theory

Essays on Market Design and Auction Theory
Author: BYEONGHYEON JEONG
Publisher:
Total Pages: 74
Release: 2019
Genre:
ISBN:

This dissertation studies market design and auction theory. Chapter 1 studies the impact of school choice on segregation. It shows that the popular school choice mechanisms lead to substantially different school and residential segregation, an important and overlooked aspect of choosing among school choice mechanisms. We show that open enrollment policy in public school choice program can decrease diversity of individual schools and increase segregation depending on which student allocation mechanism is used. Without open enrollment, we study the model of location choice and show that segregation is mainly associated with income. In comparing mechanisms, we show that Boston mechanism fosters segregation more than the deferred acceptance. With open enrollment, the difference between BM and DA becomes more drastic. We show that BM can actually intensify segregation when open enrollment policy is adopted, while DA is more resilient to segregation. The deferred acceptance with multi tie breaking creates maximally diverse schools. Chapter 2 considers conventional auctions when the seller can design bid spaces. Any symmetric equilibrium in a second price auction with bid spaces can be replicated with an equilibrium in a first price auction with bid spaces, but the converse doesn't hold. First price auctions with designed bid spaces revenue dominates second price auction with designed bid spaces, and well-designed first price auction is an optimal selling mechanism. Chapter 3 studies one-to-one matching environment without transfer in the presence of incomplete information on one-side. The existing notions of stability under incomplete information are studied and two alternatives are proposed. Weak Bayesian stability requires that the beliefs of the agents are dervided from a common prior via Bayes' rule and are internally consistent with the presumption that the given matching is stable. Strong Bayesian stability refines weak Bayesian stability by requiring the beliefs of agents are also externally consistent in the sense that the beliefs are narrowed down only when there is a valid reason.