scholarly journals Asymmetric Auctions with Resale

2008 ◽  
Vol 98 (1) ◽  
pp. 87-112 ◽  
Author(s):  
Isa Hafalir ◽  
Vijay Krishna
Keyword(s):  
Asymmetric Auctions ◽  
Monopoly Pricing ◽  
General Revenue ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Expected Revenue ◽  
Second Price Auctions ◽  
Independent Private Values

We study first- and second-price auctions with resale in a model with independent private values. With asymmetric bidders, the resulting inefficiencies create a motive for post-auction trade which, in our model, takes place via monopoly pricing—the winner makes a take-it-or-leave-it offer to the loser. We show (a) a first-price auction with resale has a unique monotonic equilibrium; and (b) with resale, the expected revenue from a first-price auction exceeds that from a second-price auction. The inclusion of resale possibilities thus permits a general revenue ranking of the two auctions that is not available when these are excluded. (JEL D44)

scholarly journals Entry Deterrence in Dynamic Second-Price Auctions

2016 ◽  
Vol 8 (2) ◽  
pp. 168-201
Author(s):  
Xiaogang Che ◽  
Tilman Klumpp
Keyword(s):  
Social Welfare ◽  
Entry Deterrence ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Second Price Auctions ◽  
Independent Private Values

We examine a dynamic second-price auction with independent private values and sequential costly entry. We show that delayed revelation equilibria exist in which some buyers place coordinated low early bids. These buyers revise their bids to reflect their true valuations just prior to the end of the auction. Compared to the benchmark immediate revelation equilibrium, in which buyers bid their valuations immediately after entry, fewer high-value bidders enter on expectation in the delayed revelation equilibria. Delayed revelation of buyer values decreases social welfare, but is necessary for bidders to have a strict participation incentive. (JEL D44, D82, D83)

Soft Floors in Auctions

2019 ◽  
Vol 65 (9) ◽  
pp. 4204-4221 ◽  
Author(s):  
Robert Zeithammer
Keyword(s):  
The Other ◽  
Symmetric Equilibrium ◽  
Revenue Equivalence ◽  
Bidding Strategies ◽  
Reserve Prices ◽  
Private Values ◽  
Price Auction ◽  
Winning Bidder ◽  
Second Price Auction ◽  
Independent Private Values

Several of the auction-driven exchanges that facilitate programmatic buying of internet display advertising have recently introduced “soft floors” in addition to standard reserve prices (called “hard floors” in the industry). A soft floor is a bid level below which a winning bidder pays his own bid instead of paying the second-highest bid as in a second-price auction most ad exchanges use by default. This paper characterizes soft floors’ revenue-generating potential as a function of the distribution of bidder independent private values. When bidders are symmetric (identically distributed), soft floors have no effect on revenue, because a symmetric equilibrium always exists in strictly monotonic bidding strategies, and standard revenue-equivalence arguments thus apply. The industry often motivates soft floors as tools for extracting additional expected revenue from an occasional high bidder, for example a bidder retargeting the consumer making the impression. Such asymmetries in the distribution of bidder preferences do not automatically make soft floors profitable. This paper presents two examples of tractable modeling assumptions about such occasional high bidders, with one example implying low soft floors always hurt revenues because of strategic bid-shading by the regular bidders, and the other example implying high soft floors can increase revenues by making the regular bidders bid more aggressively. This paper was accepted by Juanjuan Zhang, marketing.

scholarly journals Adverse Selection and Auction Design for Internet Display Advertising

2016 ◽  
Vol 106 (10) ◽  
pp. 2852-2866 ◽  
Author(s):  
Nick Arnosti ◽  
Marissa Beck ◽  
Paul Milgrom
Keyword(s):  
Adverse Selection ◽  
Auction Design ◽  
Display Advertising ◽  
Shill Bidding ◽  
Heavy Tailed Distributions ◽  
Price Auction ◽  
Second Price Auction ◽  
Heavy Tailed ◽  
The Cost ◽  
Second Price Auctions

We model an online display advertising environment in which “performance” advertisers can measure the value of individual impressions, whereas “brand” advertisers cannot. If advertiser values for ad opportunities are positively correlated, second-price auctions for impressions can be inefficient and expose brand advertisers to adverse selection. Bayesian-optimal auctions have other drawbacks: they are complex, introduce incentives for false-name bidding, and do not resolve adverse selection. We introduce “modified second bid” auctions as the unique auctions that overcome these disadvantages. When advertiser match values are drawn independently from heavy-tailed distributions, a modified second bid auction captures at least 94.8 percent of the first-best expected value. In that setting and similar ones, the benefits of switching from an ordinary second-price auction to the modified second bid auction may be large, and the cost of defending against shill bidding and adverse selection may be low. (JEL D44, D82, L86, M37)

Credible Auctions: A Trilemma

Econometrica ◽  
2020 ◽  
Vol 88 (2) ◽  
pp. 425-467 ◽  
Author(s):  
Mohammad Akbarpour ◽  
Shengwu Li
Keyword(s):  
Extensive Form ◽  
Optimal Auctions ◽  
Incentive Compatible ◽  
Private Values ◽  
Price Auction ◽  
Strategy Proof ◽  
Form Mechanism ◽  
Static Mechanism ◽  
Independent Private Values

Consider an extensive‐form mechanism, run by an auctioneer who communicates sequentially and privately with bidders. Suppose the auctioneer can deviate from the rules provided that no single bidder detects the deviation. A mechanism is credible if it is incentive‐compatible for the auctioneer to follow the rules. We study the optimal auctions in which only winners pay, under symmetric independent private values. The first‐price auction is the unique credible static mechanism. The ascending auction is the unique credible strategy‐proof mechanism.

Sequential Bidding in Asymmetric First Price Auctions

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Gal Cohensius ◽  
Ella Segev
Keyword(s):  
The Other ◽  
Expected Payoff ◽  
First Order ◽  
Uniform Distributions ◽  
Price Auction ◽  
Second Price Auction ◽  
Expected Revenue ◽  
Sequential Bidding

AbstractWe study asymmetric first price auctions in which bidders place their bids sequentially, one after the other and only once. We show that, when bidders’ values are drawn from uniform distributions and are asymmetric, i.e., there is a strong bidder and a weak bidder (the strong bidder’s distribution first order stochastically dominates that of the weak bidder’s), the expected revenue in the sequential bidding first price auction (when the strong bidder bids first) may be higher than in the simultaneous bidding first price auction as well as the simultaneous bidding second price auction. The expected payoff of the weak bidder is also higher in the sequential first price auction. Therefore a seller interested in increasing revenue facing asymmetric bidders may find it beneficial to order them and let them bid sequentially instead of simultaneously.

scholarly journals Obviousness around the clock

2021 ◽  
Author(s):  
Yves Breitmoser ◽  
Sebastian Schweighofer-Kodritsch
Keyword(s):  
Mechanism Design ◽  
Behavioral Effect ◽  
Dominant Strategy ◽  
Drop Out ◽  
Behavioral Differences ◽  
Feedback Effects ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Auction Formats

AbstractLi (Am Econ Rev 107(11):3257–3287, 2017) introduces a theoretical notion of obviousness of a dominant strategy, to be used as a refinement in mechanism design. This notion is supported by experimental evidence that bidding is closer to dominance in the dynamic ascending-clock auction than the static second-price auction (private values), noting that dominance is theoretically obvious in the former but not the latter. We replicate his experimental study and add three intermediate auction formats that decompose the designs’ differences to quantify the cumulative effects of (1) simply seeing an ascending-price clock (after bid submission), (2) bidding dynamically on the clock, and (3) getting (theoretically irrelevant) drop-out information about other bidders. The theory predicts dominance to become obvious through (2), dynamic bidding. We find no significant behavioral effect of (2), however, while the feedback effects (1) and (3) are highly significant. We conclude that behavioral differences between second-price and ascending-clock auctions offer rather limited support for the theory of obviousness and that framing has surprisingly large potential in mechanism design.

The Spite Motive and Equilibrium Behavior in Auctions

2003 ◽  
Vol 2 (1) ◽  
Author(s):  
John Morgan ◽  
Ken Steiglitz ◽  
George Reis
Keyword(s):  
Laboratory Experiments ◽  
English Auctions ◽  
Revenue Equivalence ◽  
Equilibrium Behavior ◽  
Private Values ◽  
Equilibrium Bidding ◽  
Second Price Auctions ◽  
Independent Private Values ◽  
Better Than

Abstract We study auctions where bidders have independent private values but attach a disutility to the surplus of rivals, and derive symmetric equilibria for first-price, second-price, English, and Dutch auctions. We find that equilibrium bidding is more aggressive than standard predictions. Indeed, in second-price auctions it is optimal to bid above one's valuation; that is, bidding "frenzies" can arise in equilibrium. Further, revenue equivalence between second-price and first-price auctions breaks down, with second-price outperforming first-price. We also find that strategic equivalence between second-price and English auctions no longer holds, although they remain revenue equivalent. We conclude that spiteful bidding rationalizes anomalies observed in laboratory experiments across the four auction forms better than the leading alternatives.

scholarly journals Revenue Comparison in Asymmetric Auctions with Discrete Valuations

2013 ◽  
Vol 13 (1) ◽  
pp. 429-461 ◽  
Author(s):  
Nicola Doni ◽  
Domenico Menicucci
Keyword(s):  
The Other ◽  
Unique Equilibrium ◽  
Equilibrium Outcome ◽  
Asymmetric Auctions ◽  
First Order ◽  
Reserve Prices ◽  
Revenue Comparison ◽  
Asymmetric Auction ◽  
Price Auction ◽  
Second Price Auction

AbstractWe consider an asymmetric auction setting with two bidders such that the valuation of each bidder has a binary support. First, we characterize the unique equilibrium outcome in the first price auction for any values of parameters. Then we compare the first price auction with the second price auction in terms of expected revenue. Under the assumption that the probabilities of low values are the same for the two bidders, we obtain two main results: (i) the second price auction yields a higher revenue unless the distribution of a bidder’s valuation first-order stochastically dominates the distribution of the other bidder’s valuation “in a strong sense” and (ii) introducing reserve prices implies that the first price auction is never superior to the second price auction. In addition, in some cases, the revenue in the first price auction decreases when all the valuations increase.

scholarly journals Online Second Price Auction with Semi-Bandit Feedback under the Non-Stationary Setting

2020 ◽  
Vol 34 (04) ◽  
pp. 6893-6900
Author(s):  
Zhao Haoyu ◽  
Chen Wei
Keyword(s):  
Time Horizon ◽  
Joint Distribution ◽  
Reserve Price ◽  
Total Revenue ◽  
Dynamic Case ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Private Value ◽  
Over Time

In this paper, we study the non-stationary online second price auction problem. We assume that the seller is selling the same type of items in T rounds by the second price auction, and she can set the reserve price in each round. In each round, the bidders draw their private values from a joint distribution unknown to the seller. Then, the seller announced the reserve price in this round. Next, bidders with private values higher than the announced reserve price in that round will report their values to the seller as their bids. The bidder with the highest bid larger than the reserved price would win the item and she will pay to the seller the price equal to the second-highest bid or the reserve price, whichever is larger. The seller wants to maximize her total revenue during the time horizon T while learning the distribution of private values over time. The problem is more challenging than the standard online learning scenario since the private value distribution is non-stationary, meaning that the distribution of bidders' private values may change over time, and we need to use the non-stationary regret to measure the performance of our algorithm. To our knowledge, this paper is the first to study the repeated auction in the non-stationary setting theoretically. Our algorithm achieves the non-stationary regret upper bound Õ(min{√S T, V¯⅓T⅔), where S is the number of switches in the distribution, and V¯ is the sum of total variation, and S and V¯ are not needed to be known by the algorithm. We also prove regret lower bounds Ω(√S T) in the switching case and Ω(V¯⅓T⅔) in the dynamic case, showing that our algorithm has nearly optimal non-stationary regret.

scholarly journals A First Price Auction with an Arbitrary Number of Asymmetric Bidders

2018 ◽  
Vol 19 (2) ◽  
Author(s):  
Nicola Doni ◽  
Domenico Menicucci
Keyword(s):  
Closed Form ◽  
Arbitrary Number ◽  
Equilibrium Strategies ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction

Abstract We examine an auction setting with private values and $n\geq 2$ bidders, which differ in the probability to have a low (high) value. We prove that for the first price auction, the equilibrium strategies can be written in closed form and there are gaps in the equilibrium bid distribution of each bidder except the strongest two. Our equilibrium characterization allows to prove that in this setting the seller prefers the second price auction to the first price auction for each $n\geq 2$.

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