scholarly journals Lindahl vs. Lindahl: Optimal siting and sizing of a noxious facility

2020 ◽  
Author(s):  
Eduardo Ferraz ◽  
Cesar Mantilla
Keyword(s):  
Host Community ◽  
Equilibrium Outcome ◽  
Price Auction ◽  
Second Price Auction ◽  
Net Benefits ◽  
Facility Size

The provision of projects generating net benefits for several communities except for the host community poses two problems: where to locate the unpleasant facility, and how large this facility should be. We propose a mechanism that combines some market-like properties with a modified second-price auction. We elicit prices per unit as a host and as a contributor to the facility, the desired quantity (i.e., facility size), and an auction's bid defining the hosting community. Regardless of whom is selected as the host, any equilibrium outcome of this mechanism is a Lindahl allocation. If, in addition, every community truthfully reveals its gain from becoming the host (with respect to being a contributor), the selected Lindahl allocation is globally optimal.

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.

Active bidders versus smart bidders

2019 ◽  
Vol 53 (4) ◽  
pp. 585-606 ◽  
Author(s):  
Kacy K. Kim ◽  
Michael J. Gravier ◽  
Sukki Yoon ◽  
Sangdo Oh
Keyword(s):  
Design Methodology ◽  
Online Auction ◽  
Product Categories ◽  
Minimum Number ◽  
Price Auction ◽  
Second Price Auction ◽  
Shopping Goals ◽  
Proxy Bidding ◽  
Practical Implications ◽  
At Will

Purpose The purpose of this paper is to contrast two lay theories of how consumers draw affective inferences about their online bidding experiences. The active-bidder theory (smart-bidder theory) predicts that after winning a bid, highly (minimally) participative bidders would be more satisfied than minimally (highly) participative bidders. Design/methodology/approach Four experiments test two competing hypotheses, the active-bidder hypothesis and the smart-bidder hypothesis (Study 1), identify a condition that mitigates the observed effects (Study 2), identify when the mitigation is effective or ineffective (Study 3) and replicate the findings in a scenario-based study where participants are allowed to make actual bidding decisions (Studies 4A and 4B). Findings The findings support the smart-bidder hypothesis across three different product categories; however, this heuristic-driven effect is absent when bidders have concrete shopping goals. The effect was sufficiently robust to be observed even when the bids are made at will. Research limitations/implications The present research does not incorporate the widely adopted procedure of second-price auction (also known as proxy bidding in the eBay setting), a system that allows the highest bidder to win the auction but pay the amount of the second-highest bid. Practical implications Online consumers should be mindful that entering the minimum number of bids not only helps consumers avoid overbidding but also elevates their joy in winning after the auction ends. Originality/value Prior research on bidding behavior on online auction sites has yet to examine how different bidding dynamics affect consumers’ post-auction satisfaction. This research sheds light on the psychological process underlying the robust phenomenon: online auction consumers rely heavily on proxy signals. Bidders appear to use the efficiency heuristic in constructing their affective judgments of their buying experiences.

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)

Why the Reserve Price Should Not Be Kept Secret

2006 ◽  
Vol 6 (1) ◽  
Author(s):  
Karine Brisset ◽  
Florence Naegelen
Keyword(s):  
Price Policy ◽  
Risk Averse ◽  
Relative Risk Aversion ◽  
Reserve Price ◽  
Bayesian Equilibrium ◽  
Ascending Auctions ◽  
Price Auction ◽  
Second Price Auction ◽  
Optimal Reserve ◽  
Secret Reserve Price

This paper considers the optimality of setting a secret reserve price in ascending auctions. Contrary to intuition, an ascending auction is no longer equivalent to a second price auction when the reserve price is secret. We determine the seller's optimal reserve price policy when the bidders' values are private and independently distributed and when the bidders are risk averse. We show that an optimal secret reserve price policy can dominate an optimal public reserve price policy when the bidders' degree of constant relative risk aversion is sufficiently high and when the seller can commit to a reserve price policy before learning her type. In contrast, a secret reserve price policy can never be part of a Bayesian equilibrium when the seller is informed.

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