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.

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 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)

scholarly journals Sequential auctions and price anomalies

2014 ◽  
Vol 59 (200) ◽  
pp. 7-42 ◽  
Author(s):  
Dejan Trifunovic
Keyword(s):  
Empirical Research ◽  
Theoretical Models ◽  
Sequential Auctions ◽  
English Auctions ◽  
Bidding Strategies ◽  
Empirical Results ◽  
Heterogeneous Objects ◽  
Increasing Trend ◽  
Private Values ◽  
Equilibrium Bidding

In sequential auctions objects are sold one by one in separate auctions. These sequential auctions might be organized as sequential first-price, second-price, or English auctions. We will derive equilibrium bidding strategies for these auctions. Theoretical models suggest that prices in sequential auctions with private values or with randomly assigned heterogeneous objects should have no trend. However, empirical research contradicts this result and prices exhibit a declining or increasing trend, which is called declining and increasing price anomaly. We will present a review of these empirical results, as well as different theoretical explanations for these anomalies.

scholarly journals Optimal auction mechanisms with private values

2010 ◽  
Vol 55 (184) ◽  
pp. 71-112 ◽  
Author(s):  
Dejan Trifunovic
Keyword(s):  
Single Object ◽  
Revenue Equivalence ◽  
Equilibrium Behavior ◽  
Demand Theory ◽  
Sealed Bid ◽  
Optimal Auction ◽  
Private Values ◽  
Auction Mechanisms ◽  
Expected Revenue ◽  
Sealed Bid Auctions

This paper reviews equilibrium behavior in different auction mechanisms. We will deal with two types of open auctions, English and Dutch, and two types of sealed-bid auctions, first-price and second-price, when there is a single object for sale and bidders have private values. We show that under certain conditions all four auctions yield the same expected revenue to the seller, but once these assumptions are relaxed revenue equivalence does not hold. We will also study auctions by using standard tools from demand theory. Finally, we will analyze collusive behavior of bidders. The two goals that an auction mechanism has to achieve are efficient allocation and maximization of the seller's expected revenue.

scholarly journals Core-stable rings in auctions with independent private values

2011 ◽  
Vol 73 (1) ◽  
pp. 52-64 ◽  
Author(s):  
Omer Biran ◽  
Françoise Forges
Keyword(s):  
Private Values ◽  
Independent Private Values

scholarly journals A measure of the variability of revenue in auctions: A look at the revenue equivalence theorem

2006 ◽  
Vol 2006 ◽  
pp. 1-14 ◽  
Author(s):  
Fernando Beltrán ◽  
Natalia Santamaría
Keyword(s):  
Equivalence Theorem ◽  
Auction Theory ◽  
Two Dimensions ◽  
Revenue Equivalence ◽  
Extensive Simulation ◽  
Value Set ◽  
Equilibrium Bidding ◽  
The One

One not-so-intuitive result in auction theory is the revenue equivalence theorem, which states that as long as an auction complies with some conditions, it will on average generate the same revenue to an auctioneer as the revenue generated by any other auction that complies with them. Surprisingly, the conditions are not defined on the payment rules to the bidders but on the fact that the bidders do not bid below a reserve value—set by the auctioneer—the winner is the one with the highest bidding and there is a common equilibrium bidding function used by all bidders. In this paper, we verify such result using extensive simulation of a broad range of auctions and focus on the variability or fluctuations of the results around the average. Such fluctuations are observed and measured in two dimensions for each type of auction: as the number of auctions grows and as the number of bidders increases.

scholarly journals Uplift Resistance Capacity of Anchor Piles used in Marine Aquaculture

2021 ◽  
Author(s):  
Fukun Gui ◽  
Jianqiao Kong ◽  
Dejun Feng ◽  
Xiaoyu Qu ◽  
Fang Zhu ◽  
...  
Keyword(s):  
Laboratory Experiments ◽  
Failure Load ◽  
Lateral Displacement ◽  
Single Pile ◽  
Initial Tension ◽  
Marine Aquaculture ◽  
Pile Diameter ◽  
Single Piles ◽  
Uplift Resistance ◽  
Better Than

Abstract Anchor piles are widely used in marine aquaculture, and their uplift resistance capacity largely determines their safety, especially in harsh ocean environments. However, a practical guide on its design and installation is wanting. Laboratory experiments were conducted to investigate the effect of the initial tension angle, pile diameter, embedded depth, and pile configuration on the uplift resistance capacity of anchor piles for marine aquaculture under oblique loads. The results show that increasing the initial tension angle of circular and square single piles can significantly improve the uplift resistance capacity. The failure load of the square single pile was slightly higher than that of the circular single pile. Increasing the pile diameter can effectively improve the failure load and delay the development speed of the pile top displacement. Increasing the embedded depth can effectively improve the failure load and increase the lateral displacement of the pile top. The uplift resistance capacity of the dual anchor piles was better than that of the single anchor piles. The layout configuration has little effect on the failure load, but has a large effect on the displacement development.

scholarly journals Projection of Private Values in Auctions

2021 ◽  
Vol 111 (10) ◽  
pp. 3256-3298
Author(s):  
Tristan Gagnon-Bartsch ◽  
Marco Pagnozzi ◽  
Antonio Rosato
Keyword(s):  
Allocative Efficiency ◽  
Reserve Price ◽  
English Auctions ◽  
Common Value ◽  
Private Values ◽  
Optimal Reserve ◽  
Intensity Of Competition

We explore how taste projection—the tendency to overestimate how similar others’ tastes are to one’s own—affects bidding in auctions. In first-price auctions with private values, taste projection leads bidders to exaggerate the intensity of competition and, consequently, to overbid—irrespective of whether values are independent, affiliated, or (a)symmetric. Moreover, the optimal reserve price is lower than the rational benchmark, and decreasing in the extent of projection and the number of bidders. With an uncertain common-value component, projecting bidders draw distorted inferences about others’ information. This misinference is stronger in second-price and English auctions, reducing their allocative efficiency compared to first-price auctions. (JEL D11, D44, D82, D83)

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