scholarly journals First‐price auctions with budget constraints

2020 ◽  
Vol 15 (1) ◽  
pp. 199-237 ◽  
Author(s):  
Maciej H. Kotowski
Keyword(s):  
Sufficient Conditions ◽  
Budget Constraints ◽  
Symmetric Equilibrium ◽  
Bidding Strategies ◽  
Sealed Bid ◽  
Price Auction ◽  
Pure Strategies ◽  
Interdependent Valuations ◽  
Budget Levels

Consider a first‐price sealed‐bid auction with interdependent valuations and private budget constraints. Focusing on the two‐bidder case, we identify new sufficient conditions for the existence of a symmetric equilibrium in pure strategies. In equilibrium, agents may adopt discontinuous bidding strategies that result in a stratification of competition along the budget dimension. Private budgets can simultaneously lead to more aggressive bidding (a high‐budget agent leverages his wealth to outbid rivals) and more subdued bidding (competition becomes less intense among bidders at distinct budget levels). The presence of budget constraints may lead to multiple symmetric equilibria in the first‐price auction.

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.

Determining bidding strategies in sequential auctions: Quasi-linear utility and budget constraints

2007 ◽  
Vol 38 (8) ◽  
pp. 72-83 ◽  
Author(s):  
Hiromitsu Hattori ◽  
Makoto Yokoo ◽  
Yuko Sakurai ◽  
Toramatsu Shintani
Keyword(s):  
Sequential Auctions ◽  
Budget Constraints ◽  
Bidding Strategies ◽  
Linear Utility

scholarly journals On the ratifiability of efficient cartel mechanisms in first-price auctions with participation costs and information leakage

2019 ◽  
Author(s):  
Xiaoyong Cao ◽  
Shao-Chieh Hsueh ◽  
Guoqiang Tian
Keyword(s):  
Information Leakage ◽  
Sealed Bid ◽  
Price Auction ◽  
Participation Costs

Abstract This paper addresses the ratifiability of an efficient cartel mechanism in a first-price auction. When a seller uses a first-price sealed-bid auction, the efficient all-inclusive cartel mechanism will no longer be ratifiable in the presence of both participation costs and potential information leakage. A bidder whose value is higher than a cut-off in the cartel will have an incentive to leave the cartel, thereby sending a credible signal of his high value, which discourages other bidders from participating in the seller’s auction. However, the cartel mechanism is still ratifiable where either the participation cost or information leakage is absent.

WELFARE LOSS IN LINEAR PRICE-PREFERENCE PROCUREMENT AUCTIONS

2007 ◽  
Vol 09 (04) ◽  
pp. 719-730
Author(s):  
WINSTON T. H. KOH
Keyword(s):  
Uniform Distribution ◽  
Upper Bound ◽  
Government Procurement ◽  
Welfare Loss ◽  
Procurement Auctions ◽  
Domestic Firms ◽  
Sealed Bid ◽  
Non Linear ◽  
Price Auction

In government procurement auctions, discrimination in favor of one group of participants (e.g. domestic firms, minority bidders) over another group is a common practice. The optimal discriminatory rules for these auctions are typically non-linear and could be administratively complex and costly to implement. In practice, procurement auctions are usually organized as sealed-bid first-price auction with a simple percentage price-preference policy. In this paper, we analyze a model with two bidders that draw their costs from a common uniform distribution, and derive an upper bound to the welfare loss resulting from the use of linear-price preference auctions.

An Analysis of Protectionist First-Price Auctions

1993 ◽  
Vol 37 (1) ◽  
pp. 21-30
Author(s):  
Winston T. H. Koh
Keyword(s):  
Foreign Firm ◽  
Consumer Surplus ◽  
Government Procurement ◽  
Knowing That ◽  
Sealed Bid ◽  
Government Project ◽  
Price Auction ◽  
Second Price Auction ◽  
The Government ◽  
Sealed Bid Auctions

The paper considers the following problem: One local firm and one foreign firm, each risk-neutral, bid to supply a government project, each knowing its cost, and knowing that the rival's cost is independently uniform on [0,1]. The government wishes to maximise the local surplus, defined as the sum of consumer surplus and the local firm's profit. The paper analyses the equilibrium bid strategies for the protectionist first-price auction, and shows that the protectionist first-price auction generates a larger local surplus compared with the protectionist second-price auction when rule-of-thumb discrimination is practised. The result provides another reason for the prevalence of sealed-bid auctions in government procurement.

Sealed-Bid Timber Sales—Performance Indicators and Bidding Strategies

1985 ◽  
Vol 9 (1) ◽  
pp. 6-10
Author(s):  
Robert M. Shaffer
Keyword(s):  
Performance Analysis ◽  
Success Rate ◽  
Performance Indicators ◽  
Sales Performance ◽  
The South ◽  
Factors Affecting ◽  
Bidding Strategies ◽  
Sealed Bid ◽  
Timber Sales ◽  
Local Norms

Abstract Sealed bidding is the preferred method for selling stumpage in many areas of the South. Industry timber procurement managers are concerned with both the success rate and the amount of overbid when assessing bidding performance. Analysis of 56 sealed-bid timber sales establishes local norms for these performance indicators in a 14-county area of south Alabama and northwestern Florida. Bidding strategies are examined and categorized as must-win, strongly competitive, weakly competitive, and noncompetitive. Factors affecting bidding performance are discussed.

scholarly journals Using Field Experiments to Test Equivalence Between Auction Formats: Magic on the Internet

1999 ◽  
Vol 89 (5) ◽  
pp. 1063-1080 ◽  
Author(s):  
David Lucking-Reiley
Keyword(s):  
Theoretical Prediction ◽  
Field Experiments ◽  
The Internet ◽  
English Auctions ◽  
Dutch Auction ◽  
Sealed Bid ◽  
Laboratory Results ◽  
Price Auction ◽  
Auction Format ◽  
Auction Formats

William Vickrey's predicted equivalences between first-price sealed-bid and Dutch auctions, and between second-price sealed-bid and English auctions, are tested using field experiments that auctioned off collectible trading cards over the Internet. The results indicate that the Dutch auction produces 30-percent higher revenues than the first-price auction format, a violation of the theoretical prediction and a reversal of previous laboratory results, and that the English and second-price formats produce roughly equivalent revenues. (JEL C93, D44)

scholarly journals Strategies for Making Best Offers on eBay

2017 ◽  
Vol 14 (3) ◽  
Author(s):  
William Britt ◽  
William Gryc ◽  
Jamie Oliva ◽  
Brittney Tuff ◽  
Charli White
Keyword(s):  
Optimal Strategies ◽  
Bidding Strategy ◽  
Model Risk ◽  
Know How ◽  
Bayesian Nash Equilibrium ◽  
Sealed Bid ◽  
Risk Neutral ◽  
Price Auction ◽  
Equilibrium Bidding ◽  
Best Offer

We model for “Buy-It-Now or Best Offer” auctions on eBay using two different models. In the first model, risk-neutral bidders submit bids in serial and try to surpass a stochastic seller threshold while taking into account how many previous failed bids were made by other bidders. We compute optimal strategies for this model and show that bidder expected surplus decreases in the number of previous failed bids. In the second model we assume bidders do not know how many previous failed bids have been made, and instead use a first-price sealed-bid mechanism with a buy-out price where bidders serially submit bids with the knowledge that no previous bidders have used the buy-out price. We derive a unique equilibrium bidding strategy for risk-neutral bidders in this serial model, show that any equilibrium in a similar parallel bidding model is the same as the equilibrium in the serial model, and compute seller revenue. In particular, under certain circumstances, bidders will bid more in this format than they would in a standard first-price sealed-bid auction, but that a seller maximizes expected revenue by setting a buy-out price higher than any bidder is willing to pay thereby making the auction essentially a first-price auction. KEYWORDS: Auction Theory; eBay; Buy-It-Now or Best Offer; Symmetric Bayesian Nash Equilibrium; Buy-Out Price; First-Price Sealed-Bid

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